Analysis from Redfin said a survey of more than 500 agents in January showed a majority of offers faced competition, and the worse could be on the way as inventory is at its lowest point in seven years.
Redfin previously reported that home listings fell 11.4% annually in January—the biggest decline since March 2013 and the sixth straight month of declines.
“Low mortgage rates have brought buyers back to the housing market, but a lack of listings means buyers are having to compete with one another to secure a sale and lock in a mortgage rate,” said Daryl Fairweather, Redfin Chief Economist. “This competition pushes up prices, which means that even though buyers can get a good deal on a mortgage now they are often paying a higher sticker price.”
The San Francisco Bay Area was found to be the most competitive city in the nation, with agents estimating more than 90% of homes had multiple officers. San Francisco has a median-home price of more than $1 million.
“After missing out on one home due to a bidding war, my clients were much more aggressive on their next offer,” said Redfin San Jose agent Jennifer Tollenaar. “In order to beat 24 other offers, they put 50% down, wrote a great letter to the sellers, and removed all contingencies. This was on a home with a purchase price of over $1.7 million.”
Arizona Redfin agent Thomas Wiederstein said inventory is so low in Phoenix that a client had a bidding war with more than 10 offers for three consecutive weekends.
“Offering well above listing price isn’t enough in today’s market. You have to do that, plus waive contingencies just to have your offer considered by sellers,” he said.
Redfins says that of the 24 markets tracked, all but five showed increased competition. The city with the least amount of competition was Greenville, South Carolina.
Rising demand is causing home prices to continue their ascent. First American’s Real House Price Index (RHPI) revealed Monday that real house prices rose 1.4% from November 2019 to December 2019. Consumer home-buying power fell 0.2% during that same time frame but rose 14% year-over-year.
Median-household income increased just 202.% from December 2018. House prices are 17.3% less expensive than in January 2000.
“House-buying power exceeds median house price in most of the markets we monitor in our RHPI. However, while low mortgage rates and higher income boost affordability and demand for homes, it’s hard to buy what’s not for sale,” said Mark Fleming, First America’s Chief Economist. “That means sellers’ market conditions are likely to persist in 2020, as short supply and strong demand will drive faster price appreciation and reduce the current levels of affordability in many markets. The question is, can house-buying power growth can keep up.”
First American’s report found California to have the four highest average home price on a three-month average: San Jose ($1.04 million); San Francisco ($945,547); Los Angeles ($641,346); and San Diego ($564,813).