HOME BUYERS FACE BIDDING WARS WITH NO RELIEF EXPECTED

Presidents Day weekend marks the unofficial start of the spring housing market and bidding wars are off the charts, even as home prices are rapidly rising.

The primary reason longtime home searchers haven’t bought a house yet is because they keep getting outbid. About 40% of potential buyers cited that in a new survey by the National Association of Home Builders. The reasons are flipped from a year earlier when 44% said unaffordable prices were the biggest reason they hadn’t bought yet, and 19% cited getting outbid.

Well over half of all buyers, 56%, faced bidding wars on their offers in January, according to a Redfin survey. That is up from 52% in December. More than half of homes are now going under contract in less than two weeks.

“With so few new listings hitting the market, I expect bidding wars to become more common and involve even more potential buyers as we head into the spring homebuying season,” said Daryl Fairweather, chief economist at Redfin. She advises buyers to be ready to go see properties the moment they hit the market and to get preapproved for a mortgage.

The problem is supply, or lack thereof -- record low supply. Sudden strong demand, driven by the stay-at-home culture of the Covid pandemic, swiftly smacked into already low inventory, due to lackluster homebuilding. Record-low mortgage rates only fueled demand even more.

Presidents Day weekend marks the unofficial start of the spring housing market and bidding wars are off the charts, even as home prices are rapidly rising.

Sellers have also pulled back, not wanting to go through the ordeal of putting their homes on the market during Covid. The number of newly listed homes in January was down 29% year over year, pushing the total inventory down 47%, according to realtor.com.

“Paul Legere, a buyer’s agent with the Joel Nelson Group in Washington DC, said "the low cost of money now has buyers able to be more aggressive and willing to overpay for properties and it's difficult to help clients find value. It is a constant struggle and scramble to find desirable targets.

“Lower mortgage rates are making monthly payments for higher-priced homes more manageable,” said realtor.com’s chief economist, Danielle Hale. “But finding a home that checks the right boxes amid limited supply, and saving up for the larger down payment needed with higher home prices, continue to be challenging, especially for first-time homebuyers who haven’t accumulated home equity as prices have gone up.”