Agents at Redfin expect the spring thaw to open the gates to stiff competition among homebuyers that will put sellers in a far better position to negotiate than last year.
A survey released by Redfin showed that nearly half the company's Northeast agents and about 40 percent of its Midwest agents believe competition among buyers will be far more fierce this spring.
The bedrock of these beliefs lies in a combination of low inventory and an end to the winter hibernation among potential buyers in areas hit hard by the 2013-14 winter. Most of the 435 Redfin agents, surveyed in 26 U.S. markets, said that unusually harsh weather in the Northeast, Midwest, and Southeast kept buyers away all winter.
But now the homebuying market is heating up with the spring, and sellers are anticipating reaping the benefits of increased interest among buyers—so much so that more sellers are negotiating to rent their homes back from buyers for several months to give themselves time to compete for their next home.
“In this competitive market, it is very challenging to sell a home and buy a new one without becoming temporarily homeless,” said Jeremy Cunningham, a Redfin agent based in northern Virginia. “For buyers, being sensitive to this challenge, or even offering a rent-back agreement upfront, can help their offer stand out.”
Low inventory in major Northeast and Midwest metros such as Chicago and Boston ups the ante for competition among buyers. So does the trend toward migration among buyers, who are increasingly looking farther afield for homes, the survey found. One Boston agent, Adam Welling, stated that bidding wars there are already heating up significantly for this reason.
“The difference this year is that competition has spread," Welling said. "With inventory so low, homebuyers are expanding their search, and neighborhoods that didn’t have multiple offers last year are now seeing heavy competition.”
Redfin's agents said that the balance of power now tilts toward the seller, especially in the West. About half the agents in all markets said that sellers have a little more power than buyers. But in the West, where weather is no factor but inventory is, agents said that sellers "have all the power.”
A February report from Redfin showed that escalating home prices in the West have held potential buyers back. Whether this will put power in the hands of the fewer buyers braving the market or in the hands of sellers who can ask higher prices remains to be seen.