As the U.S. housing market cools, homebuyers are taking a bit more of the power back from what’s been an extremely seller-friendly market for over two years.
At the peak of the pandemic housing frenzy — especially in the West — buyers were facing brutal competition, with some homes seeing dozens of offers within days of hitting the market.
It was an exciting time to be a seller and helped drive prices to new heights, but also drove buyers to desperation. Winning offers often had to be well over the asking price, some to the tune of tens of thousands of dollars, and some buyers have even been willing to waive inspections or other due diligence to stand out from the competition.
But it’s looking like we’re moving past those days.
What’s new: Last month, bidding wars became less common and homebuyer competition has now dropped to its lowest level since 2020, before COVID-19 sent the national market into upheaval.
But bidding wars haven’t gone away completely, either.
That’s according to a Redfin report published this week, which showed nearly 49.9% of home offers written by Redfin agents faced competition on a seasonally adjusted basis in June. That’s the first time the bidding war rate has been below 50% in almost two years.
In spring of 2020, the housing market screeched to a near standstill as COVID-19 first started spreading in the U.S., fueling fear and uncertainty. But as Americans came to terms with stay-at-home orders and a new work-from-home reality, that spurred many to reevaluate their lives. Some left big cities in search of homes with more space at lower price points. That led housing markets in already growing western states like Idaho and Utah to boil over.
By the numbers: June’s under 50% bidding war rate compares with a revised rate of 65% one year earlier and 57.3% in May, marking the fifth straight month of declines, Redfin reported. On an unadjusted basis, June’s bidding war rate was 51.5%, down from 66.7% one year earlier.
Homebuyers are seeing less competition as the nation’s housing market enters what Fortune has declared “recession” territory. The Federal Reserve’s war on inflation and resulting higher mortgage rates have had an abrupt cooling effect as would-be homebuyers either back away or are simply priced out.
In June, about 60,000 home purchase agreements were canceled, Redfin reported, equal to 14.9% of homes that went under contract that month.
What they’re saying: “While the market is cooling, it’s not coming to a crashing halt,” Shoshana Godwin, a Redfin real estate agent in Seattle, said in a prepared statement. “House hunters who can still afford to buy should consider taking advantage of the slowdown given that there’s way less competition.”
Nationwide, the typical monthly mortgage payment is now $2,387 at this week’s 5.51% mortgage rate. That’s up 44% from a year ago, according to Redfin.
However, as the market slows, home prices aren’t growing at the same rate as they have been. While U.S. home sales prices are still higher than 2021’s shocking price increases, their growth rates are starting to dip.
Homes sitting for sale: Alongside declining buyer competition, homes are also starting to spend more time on the market than they have over the past two years.
The typical U.S. home sold in a four-week period ending July 17 spent 19 days on the market, one day longer than this time last year. “This marks the first time in two years that the median time on market has posted a year-over-year gain,” Redfin reported.
“Buyers, who earlier this year had to race to beat the competition, can now take their time touring homes and perhaps even wait to see if sellers drop the price,” said Daryl Fairweather, Redfin’s chief economist.