Bidding wars for properties are off the charts as listings fall to report low

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Bidding wars for homes are off the charts as listings fall to record low

People wait to visit a home for sale in Floral Park, Nassau County, New York, United States on September 6, 2020.

Wany Ying | Xinhua News Agency | Getty Images

Presidents Day weekend marks the unofficial start of the spring housing market. However, if you’re looking to jump in this year, hold onto your wallet. Bid wars are off the charts, even when property prices are rising rapidly.

The main reason why longtime house hunters haven’t bought a home is because they keep getting outbid. About 40% of potential buyers said so in a new survey by the National Association of Home Builders. The reasons are the opposite of the previous year, when 44% said unaffordable prices were the main reason they hadn’t bought and 19% said they were outbid.

According to a Redfin survey, well over half of all buyers, 56%, faced bidding wars on their offers in January. That is an increase of 52% in December. More than half of the homes are signed in less than two weeks.

“With so few new offers coming out, I expect bidding wars to become more frequent and engaging even more potential buyers as we head into the spring buying season,” said Daryl Fairweather, chief economist at Redfin.

She advises buyers to be ready to view properties as soon as they hit the market and get pre-approved for a mortgage.

“But you know when to step back when the price goes up more than you are willing to pay,” added Fairweather.

Competition is fierce nationwide, but worst in Salt Lake City, where 9 out of 10 offers were competitive across 24 major markets, according to Redfin’s survey. It was followed by San Diego (78.9%), the Bay Area (77.1%), Denver (73.9%) and Seattle (73.8%).

The problem is supply, or a lack of it – low supply. Suddenly strong demand, driven by the Covid pandemic culture of staying home, quickly resulted in already low inventory levels due to poor housing construction. Record-low mortgage rates only drove demand further.

Paul Legere is a Buyer for the Joel Nelson Group in Washington, DC. He says his job is getting more and more difficult.

“The low cost of money now has buyers who are more aggressive and willing to overpay for real estate. As a buyer agent trying to help customers add value, that piece of the equation is nearly impossible,” Legere said. “It is a constant struggle and struggle to find desirable targets.”

Sellers have also pulled back and didn’t want to go through the ordeal of getting their homes on the market during Covid. The number of newly listed properties fell by 29% year-on-year in January, which according to realtor.com led to a 47% decrease in the total number.

House prices had risen in double digits a week for 26 weeks through January. The median list price for a home rose nearly 13% from January 2020.

“Lower mortgage rates make monthly payments for higher-priced homes more manageable,” said Danielle Hale, chief economist at realtor.com. “But finding a home that ticks the right boxes when supply is limited and saves for the larger down payment required when property prices rise continues to be a challenge, especially for first-time home buyers who have not accumulated equity as prices have risen. “