Warm Weather Ignites Greater Competition for Homes

Competition for homes kicked up a notch last month as the spring season started, though bidding wars remain markedly down compared to the same time last year.

In March, 63.4 percent of offers written by Redfin agents across 19 markets faced competition from other buyers, the national brokerage reported. While that percentage is up a few points from February—owing in some part to more favorable weather—it’s a full 10 percentage points down compared to March 2013.

There are a few reasons why bidding wars may have dropped off over the last year, the most significant of which being the fact that inventory has come up—albeit slightly—in the same period. With more homes on market to choose from in some areas, home shoppers aren’t forced to fight as much over what’s available, says Minni MacFarlane, a Redfin agent in Orange County, California.

“Competition can still get intense, but because prices have risen so much, my clients and I try to be more discerning about how far we should go to win a home,” MacFarlane said. “This year, a bidding war is more likely to drive the price of a home higher than it’s worth competing for, and I think it will be easier for us to walk away from a situation like that.”

That’s not to say the market isn’t still tough in certain metros: In San Jose, the most competitive market in March, just fewer than 90 percent of homes received multiple offers, and the buying climate in San Francisco and Los Angeles wasn’t much better.

Meanwhile, Redfin expects some markets, including Seattle, Portland, and Denver, to see even fiercer competition than last year.

All of that buyer demand means higher sale prices. Last month, 37.9 percent of homes sold in the markets surveyed by Redfin went for higher than the asking price, up from 22 percent at the start of 2014 but down from 44.8 percent last year.

While competition remains down compared to 2013, Redfin notes a few competitive strategies have gained popularity over the last 12 months—particularly the share of buyers paying all-cash, which was up to 7.2 percent from 3.9 percent.

Based on a three-month moving average, Campbell Surveys estimates 26.2 percent of home purchases by current homeowners nationwide relied solely on cash in March, partly due to frustrations stemming from the mortgage lending process.