A record month for bidding wars in the United States

There’s no end in sight to the intense competition for homes that has rocked the U.S. real estate market since the pandemic began, especially in the entry-level luxury market.

In February, homes listed between $1 million and $1.5 million had the highest bidding war rate of 76.6%, according to the Redfin Friday report that analyzed home bids written by its agents. Nationally, a record 68.6% of all homes experienced bidding wars on a seasonally adjusted basis.

The percentage of homes facing bidding wars has generally increased over the past two years. In April 2020, 32.7% of households experienced higher bids compared to 60.2% in February 2021. Although growth has been slower since 2021, this year’s performance continues to break records.

red fin

“This is the most competitive time in history to buy a home as mortgage rates rise from historic lows amid a worsening supply crunch,” said Daryl Fairweather, economist in chief of Redfin. “The bidding wars intensified this year after rates started to climb, which lit a fire under buyers. Competition will likely plateau or even decline if rates continue to rise as expected.

El Paso, TX; Denver; and Minneapolis had the highest percentages of bidding wars compared to other metropolitan areas in the United States. In El Paso, nearly nine out of 10 homes faced a bidding war, at 87.5%. Denver and Minneapolis follow with 83% and 81.1% respectively.

“The housing inventory in El Paso is ridiculously low, especially for new construction, which is sparking bidding wars,” said Salvador Palos, a local Redfin real estate agent. “It’s not uncommon for newer homes to get 10-15 offers and sell for $20,000 above asking price.”

The highest competition was for townhouses nationwide, with three out of four townhouses experiencing bidding wars at a rate of 75.3%. Single-family homes followed with 72.9%; multi-family homes with 64.8% and condos and cooperatives with 64.6%.

Demand was also fueled by low mortgage rates, although they are on the rise. The Federal Reserve raised interest rates on Wednesday for the first time since 2018.

“This pushed the average 30-year fixed mortgage rate past 4% for the first time since 2019, hitting 4.16% in the week ending March 17. That’s up from the record low of 2.65% about two years ago,” the report noted.

“Monthly mortgage payments for new buyers have already reached an all-time high. As they continue to climb, some buyers will move to the sidelines,” Ms Fairweather said.

Laura J. Boyer