The percentage of multiple bids made on homes for sale in February hit a record high as the inventory continues to shrink and demand rises, Redfin reported.
“It’s the most competitive time in history to purchase a home because mortgage rates are rising from historic lows amid a worsening supply shortage,” said Redfin Chief Economist Daryl Fairweather in a press release. “Bidding wars intensified this year after rates started spiking, which lit a fire under buyers.”
Nationwide 68.6% of offers written on a seasonally-adjusted basis by Redfin agents in February faced a competing offer, compared with a revised 68% in January and 60.2% during February 2021. On an unadjusted basis, 71.4% of February’s offers faced a bidding war.
Seasonally-adjusted, the number of homes for sale fell in February by 13.8% compared with the prior year and by 1.5% from January, to 1.34 million units, a separate Redfin report said.
To be considered in balance, the inventory of homes for sale should have a six month supply. In February, the supply was 1.3 months, flat with January and down by 0.3 months from the prior year.
But a brick wall is rising in front of the heated housing market.
“Competition will likely plateau or even decline if rates keep increasing as expected,” Fairweather warned. “Monthly mortgage payments for new buyers are already at a record high.” Further increases could push some out of the market, she continued.
Among the 50 metro areas Redfin analyzed, El Paso, Texas had the highest bidding-war rate at 87.5% in February. The rest of the top five are Denver at 83%; Minneapolis 81.1%; Raleigh, North Carolina, 80%; and the San Francisco/San Jose area at 79.9%.
The most expensive homes were the ones that had the most competition among buyers.
Homes listed in the $1 million to $1.5 million range had a bidding-war rate of 76.6%, followed by the $600,000 to $800,000 range at 73.8% and those for over $1.5 million at 73.1%.
Meanwhile, the lowest tier, consisting of houses listed for under $200,000, faced the least competition, with a 62.7% multiple bid rate. Those with a list price between $200,000 and $300,000 had a 67.9% rate. All other price buckets had bidding-war rates of more than 70%, Redfin said.