Mortgage

The bidding wars are sinking to an nearly one-year low

Home competition in the market dipped to its lowest level in nearly a year in November, giving troubled buyers some breathing space.

The proportion of houses with multiple bids fell to 59.5% in November, suggesting that that number may have hit an 11-month low, according to Redfin. Preliminary figures for the previous months in 2021 were previously below 60%, but later revisions have exceeded this benchmark. In October the revised figure was 61.8%. Competition in the market was last so low in December 2020 when the proportion of homes for sale with more than one bid was 52.5%. A year ago, the share of houses with bid wars was 55.9%.

With anecdotal reports from real estate agents supporting evidence of decreased buyer traffic amid the normally slow winter months, Redfin expects the multi-bid percentage to remain relatively low, at least temporarily.

"We expect the competition to continue to trend downwards, mainly due to seasonality," said Taylor Marr, Deputy Chief Economist at Redfin, in an interview.

However, underlying demand remains historically strong, he noted.

As a result, according to Zillow, declining competition may not have contributed too much to affordability. Home prices have continued to surge, with the slowdown being lessened recently, said Alexandra Lee, an economist at Zillow.

"Even with a slight dip in the past few months, it seems like we're settling into a new, hotter, normal winter," she said in an interview.

Fading competition has given home buyers a little more time to review properties before they're caught, according to Zillow. A typical home sale took 12 days in November compared to 11 days in the previous month.

However, inventory levels are still historically tight relative to demand, and while housing starts have shown some relative strength lately, they may not be alleviating that much anytime soon, Lee said.

"This recovery … is definitely good news for inventory, but it will take a while [before it makes a difference]," she said.

While the primary housing market cooled slightly in November, the second homes heated up, according to Redfin. Demand for the period was 83% above pre-pandemic levels, up from 72% in the previous month, but remained below the January level of 91%, which marked a record high.

The reversal of an earlier withdrawal of Fannie Mae and Freddie Mac's second home loan purchases by the Federal Housing Finance Agency likely contributed to the rebound, Marr said. The continued remote working, which has allowed buyers to spend more time in vacation homes, likely contributed to these sales as well.

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