Bidding wars in a pandemic? Housing heats up quickly
Potential buyers arrive with a real estate agent at a home for sale in Dunlap, Illinois.
Daniel Acker | Bloomberg | Getty Images
After the housing market nearly closed in April, competition is back with fury.
States are easing social distancing restrictions, and homebuyers are once again rushing to open homes. The problem is, they can’t find much to buy.
The coronavirus pandemic caused a historic drop in the supply of homes for sale which was already quite meager. New listings fell by half in April’s second low, compared to a year ago, according to real estate broker Redfin. Weak supply and growing demand are now causing more bidding wars, especially for homes priced below $ 1 million.
More than 41% of households faced a bidding war in the four weeks ending May 10, according to Redfin. That’s up from just 9% in January, before the pandemic hit the United States
“Housing demand picked up after bottoming out in April, and this rise coupled with a lack of supply is a recipe for bidding wars,” said Redfin chief economist Taylor Marr. “Homebuyers are coming back looking for more space as they realize that using their home as an office and school can become the norm.”
Sellers, however, are not rushing to the market. Some are concerned about the economy, while others just don’t want people to visit their homes.
“There is more buyer activity on our site, as defined by engagement with our agents around the homes they are viewing, than there are new listings on our site, as defined. by inventorying new listings in the market, ”Robert Reffkin, CEO of Real Estate Brokerage Compass, said on CNBC’s“ Squawk Alley ”.
New registrations are down 29% per year for the week ending May 9, according to realtor.com, and while this is an improvement over previous weeks, progress is still slow.
“As new listings continue to decline each year, last week’s jump shows some sellers are ready for a summer home sale – a positive sign for the market,” said Danielle Hale, chief economist of realtor.com. “But despite this increase, time in the market continues to increase and there is still a long way to go to get back to the pace of new sellers from last year.”
Regionally, Boston has seen the highest proportion of bidding wars, with over 63% of bids written by Redfin agents on behalf of their clients facing competition. San Francisco and Fort Worth, Texas, were not far behind with rates of 63% and 62% respectively. San Jose, Calif., And Providence, Rhode Island, round out the top five.
There is a growing incentive for buyers as mortgage rates continue to set new records and lending appears to be easing slightly, as federal regulators clarify some of the rules surrounding the coronavirus mortgage bailout program.
“Right now buyers are like, ‘I’ve been locked in my space for three months’ and they’re evaluating their – do they have enough space inside, outside? light? Does it have the right house If the answers to these questions are no, they call their agent, ”Refkin said.“ And on top of that, you have record interest rates. And you think you are going to get a good price now. You won’t get a better price in two years. “