January Markets Most Competitive on Record

According to a new report from Redfin, some 70% of home offers written by Redfin agents faced bidding wars in January on a seasonally adjusted basis, up from 67.7% in December and 61% in January 2021. That’s the highest share since April 2020, when Redfin began recording this data, making it the most competitive month on record for homebuyers.

The housing market was more competitive than ever in January as mortgage interest rates hiked, urging buyers to rush to make offers on homes before rates increased further. The average 30-year fixed mortgage rate was 3.55% at the end of January, up from 3.11% at the end of December and a record low of 2.65% about a year earlier. January was the first time rates surpassed 3.5% since March 2020, when the coronavirus pandemic was just beginning. Rates have since jumped even higher, reaching 3.92% during the week ending Feb. 17, 2022.

Redfin economists currently predict the 30-year fixed mortgage rate will reach 4.3% by the end of 2022. Mortgage rates are expected to increase as the Federal Reserve raises interest rates in an effort to alleviate inflation.

“Rising mortgage rates are intensifying an already-severe shortage of homes for sale because buyers are feeling more urgency to buy while homeowners are feeling less urgency to sell—an imbalance that’s fueling an increase in competition,” said Redfin Chief Economist Daryl Fairweather. “Buyers are battling it out for the few homes on the market in an effort to lock in relatively low payments before rates move even higher, but homeowners who bought or refinanced in the last year are staying put because they don’t want to lose their rock-bottom mortgage rate.”

During the four-week period ending Feb. 13, a record 57% of homes that went under contract had an accepted offer within the first two weeks on the market, and asking prices surged 16% year over year to a new high. Meanwhile, new listings dropped 8%, sending housing supply to a new low.

Townhouses are more competitive than any other property type, as nearly 72.6% of Redfin offers for townhouses encountered competition in January. As home prices surge, many buyers are seeking out townhouses because they’ve been priced out of the market for single-family homes.

“Competition really ramped up again in the second half of January because buyers started to feel desperate to lock down homes while rates were still relatively low,” said Brynn Rea, a Redfin real estate agent in Spokane, WA. “One of my listings just had 45 showings in five days and got 14 offers. Another received 12 offers and sold for $120,000 over the $525,000 list price.”

Of 40 U.S. metros in this analysis, the top metros with the highest bidding-war rates were:

• Spokane, WA (83.3%)
• Sacramento, CA (80.4%)
• Seattle, WA (79.7%)
• Dallas, TX (78.1%)
• San Francisco/San Jose, CA (76.5%)

“The rise in mortgage rates won’t be too detrimental for out-of-towners moving in with lots of cash, but it will push a lot of local first-time buyers out of the market," said Rea.

She explained how essential it is to get into a home soon, otherwise some homebuyers won’t be able to afford one. If that happens, consumers will need to keep renting, which is also challenging because most rental payments are more than monthly mortgage payments due to "skyrocketing rents".

To view the full report, including charts and methodology, click here.