By Paulina Cachero
The days of homebuyers getting into knock-down-drag-out bidding wars may soon be over.
After two years of a pandemic-driven buying frenzy that sent home values soaring, the competition for listings is showing signs of cooling off as mortgage rates hit the highest level since 2009. According to a new Redfin report, 61% of home offers faced bidding wars in April, down from 63% a month earlier and 67% in the same period of 2021. An offer is considered part of a bidding war if a Redfin agent received at least one other competing bid.
While competition is still fierce, the decline is an early sign that the “meteoric” rise in mortgage rates is deterring some people from starting the housing hunt, Redfin chief economist Daryl Fairweather said in a statement.
“Higher rates are also limiting homebuyers’ ability to significantly bid up home prices, meaning some homes aren’t selling for as much over the asking price as they would have a year ago,” Fairweather said. “This could help set off a slowdown in home-price growth in the coming months.”
Mortgage rates reached 5.3% last week, up from from 3.11% at the start of the year, as the Federal Reserve hikes interest rates in an attempt to tamp down roaring inflation. The combination of higher rates and surging home prices have driven up the typical monthly mortgage payment by 44% year-over-year to an all-time high of $2,427, according to Redfin. Those elevated monthly payments have forced some people to drop out of the housing market altogether.
The biggest decline in bidding wars was in Riverside, California, where 43% of home offers saw competition in April, down from 65% a year earlier. Homes that would have received 10 bids in the Southern California town are now receiving just two or three, according to Elizabeth Rodriguez, a seller’s agent with Redfin in Riverside.
That was followed by declines in Atlanta, Olympia, Washington, San Diego, and Raleigh, North Carolina, according to Redfin’s analysis of 36 US metropolitan areas. New York and San Francisco also saw a significant reduction in bidding wars.
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