Housing market bidding wars hit 12-month low

Jason C. Finn OrangePalmStudio./Jason - stock.adobe.com

While the number of homes for sale receiving multiple offers reached a 12-month low in December, buyers are still facing plenty of competition in the market, Redfin said.

Based on preliminary data, 59.6% of home offers written by the company's agents faced bidding wars in December down from a revised rate of 61.3% in November, but up from 54% in December 2020. The drop is being attributed to normal seasonality, with buyers taking a break for the holiday season.

While bidding wars have fallen from their peak during the pandemic, 74.6% in April 2021, the inventory shortage is still driving competition for the homes that are for sale.

Meanwhile, home price growth is expected to moderate throughout 2022 as higher interest rates pull some people from the market, a recent CoreLogic report said. But low housing supply will result in increased interest in what is for sale.

"Buyers should anticipate that they may not win a house until their sixth or seventh bid," Candace Evans, a Redfin team manager in New York, said in a press release. "If you're the type of person who falls in love with a house, this is not your market."

Higher price tiers were more competitive. A 64.6% share of homes listed between $800,000 and $1 million received multiple bids. Of homes between $1 million and $1.5 million, 62% received more than one offer, while that was the case for 61.7% of properties prices above $1.5 million.

Competition at the upper end of the market is partially attributed to increased interest in pricey vacation homes, Redfin said. However, future bidding wars on vacation homes could be affected by the Federal Housing Finance Agency's imposition of between 112.5 and 387.5 basis points in additional upfront fees on second home loans sold to Fannie Mae and Freddie Mac.

The FHFA also increased the upfront fee for higher balance loans by 25 bps to 75 bps.

On the other hand, the 2022 conforming loan limit is $647,200, and if a borrower for a primary residence on an $800,000 purchase puts 20% down, the low end of that tier is likely to see more activity. In addition, the new limit for certain high cost areas is $975,000 and even with the higher fee schedule, those buyers still have a conforming option.

At the lower end of the scale, more than 55% of homes priced between $200,000 and $800,000 faced bidding wars.

Of the 37 markets analyzed by Redfin, five had multiple offer rates of 70% or higher: Salt Lake City, 74%; Tucson, Arizona, 73.1%; San Diego, 71.1%; Virginia Beach, Virginia, 70.6%; and Seattle, 70%.