House hunters, especially those seeking a higher-end single-family home, should be prepared for some fierce competition.
It is nothing new.
Countrywide, 60.9% of home offers written by Redfin agents in February faced competition, up a little from 59.3% in January—that makes 10 straight months in which more than half of Redfin offers encountered competition.
Indeed, bidders have been battling one another throughout the pandemic, as they face heightened demand for larger single-family residences, dwindling inventory, and increased desirability brought on by lower-than-ever interest rates.
Even as interest rates inch up, the want for homes continues to increase, according to the latest data from Redfin.
"The uptick in mortgage rates is likely fueling more bidding wars in the short term because house hunters are rushing to buy homes before rates rise even further,” said Redfin Chief Economist Daryl Fairweather. "If mortgage rates move significantly higher, we’ll likely see some buyers move to the sidelines, which will curb competition in the long run."
Redfin reports that buyer battles today are more intense than any of its agents have seen in the past, with the most attractive houses receiving dozens of offers, selling at breakneck speed and for tens of thousands of dollars above the asking price.
Rapid sales and buyers' willingness to pay so much more than the listed price is a sure sign of a market that doesn't seem to be cooling.
In February, homes essentially went under contract in 32 days—23 days faster than a year earlier—and a record 36% of homes went for more than their asking prices, Redfin reported.
“Every home I put on the market for under $700,000 is selling in a day,” said Heather Kruayai, a Redfin real estate agent in Jacksonville, FL. “I recently listed a three-bedroom single-family house in Durbin Crossing that got 30 offers. I’ve never seen that in my life. We had to stop showings because the sellers just couldn’t accommodate that many people coming through their house. Buyers were calling me up themselves and pleading with me to pick their offers. My client ultimately chose the bidder who had the highest offer and agreed to pay the difference if the appraisal came in lower than the contract price.”
Redfin's data determined that Salt Lake City, Utah; San Diego; Phoenix, Arizona; Denver; and San Francisco were the most competitive markets in America.
“You have to pull out all of the stops. Successful buyers are offering $30,000 to $50,000 over the asking price, limiting or waiving inspections, offering free rent-back, and agreeing to make up the difference in the event of a low appraisal,” said Monica Arnett, a Redfin real estate agent in Denver. “I had one client offer $800,000 in cash on a $750,000 listing. They were outbid by someone who offered $900,000.”
Redfin researchers recently examined strategies homebuying hopefuls and their agents can embrace to better their chances of winning when a bidding war breaks out.
One of the best ways to come out on top, Redfin found, is to make an all-cash offer, which, researchers say, almost quadruples a prospective buyer's chances, raising the odds by 290%. Waiving the financing contingency also is an effective strategy, improving homebuyers’ odds of winning by 66%, according to an analysis of data on thousands of offers written by Redfin agents on behalf of their homebuying clients from July 2020 to February 2021.
For the full reports, visit Redfin.com/news.