More than 2 in 3 (65 percent) home offers written by Redfin agents faced competition in March, according to a Redfin report. That’s down from 66.8 percent in February, marking the first month-over-month decline since September and a sign that demand is starting to cool.
Still, bidding wars remained more common than they were a year earlier when 62.2 percent of offers encountered competition.
“Most homebuyers are still encountering bidding wars, but competition is beginning to cool because surging mortgage rates and home prices are prompting some Americans to back out or put their buying plans on hold,” Redfin Chief Economist Daryl Fairweather said in a release. “We expect bidding wars to ease further in the coming months as rising mortgage rates price more buyers out of the market. That should provide some relief for people who can still afford to buy, as they’ll likely face fewer competing offers and may no longer need to offer drastically over the asking price in order to win. Unfortunately, the slowdown in competition won’t help those who have already been priced out of homeownership and are now grappling with soaring rental costs.”
The average 30-year fixed mortgage rate is at 5.11 percent, the highest level since 2010. That’s up from a record low of 2.65 percent in January 2021. Coupled with home prices increasing 17 percent year-over-year to a record $392,750, typical homebuyer’s monthly payment is up more than 30 percent.
San Jose, Calif., had the highest bidding-war rate of the metro areas Redfin analyzed, with 79.8 percent of offers written by Redfin agents facing competition in March. Next came Boston (79 percent), Providence, R.I. (78.3 percent), Worcester, Mass. (78.2 percent) and San Diego (78.1 percent).
Bidding wars in San Francisco had an average of 7.8 offers in March, down from 10 in March 2021. That’s another sign that homebuyer demand is starting to cool, according to Redfin.
“March was the first month in two years that I had a weekend with zero house tours. People are getting priced out,” Bay Area Redfin real estate agent Maria Giron said. “Some buyers are in shock and dropping out altogether. Others are looking at more affordable options like smaller homes or neighborhoods that are farther out. The buyers I’m working with who are most sensitive to the rise in mortgage rates are first-time buyers looking for homes in the $500,000 to $700,000 range.”
Nearly three-quarters (72.4 percent) of Redfin offers for townhouses faced competition in March, a higher share than any other property type. Next came single-family homes (70.2 percent), multi-family properties (68.1 percent) and condos/co-ops (62.6 percent.)
Many homebuyers have sought out townhouses because they’ve been priced out of the market for single-family homes, according to Redfin. The typical home that went under contract in March was 1,720 square feet, down 1.8 percent from 1,751 square feet a year earlier.