Rising Rates, Inventory Drive Down Buyer Competition

While summer temperatures are now consistently rising into the triple digits in many parts of the country, bidding wars for homes continue to cool, ""Redfin"":http://www.redfin.com/ said in its Real-Time Bidding Wars report for June.

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Nationally, the percentage of offers written by Redfin agents that faced multiple bids fell for the third straight month to 68.6 percent, down from 69.5 percent in May and 75.7 percent in March. Redfin analyst Ellen Haberle attributed the continued decline to rising mortgage interest rates and the ongoing easing in the inventory crunch.

""You can thank rising inventory and, gulp, higher interest rates for the ease in competition,"" Haberle said. ""Homeowners who have been waiting to sell are entering the market in greater numbers as prices--which were up [COLUMN_BREAK]

17 percent in May from the year before--continue to recover. Moreover, home builders are ramping up construction of new homes to seize on buyer demand and rising prices.""

Haberle also noted many agents have reported a drop in competing offers since interest rates spiked. She offered as evidence a report from John Venti, an agent in the Los Angeles market.

""Each of the last three offers I wrote was accepted without a counter-offer, which has been unheard-of in Los Angeles, where a home in a popular neighborhood has typically attracted 30 or 40 offers over the last several months,"" Venti said.

The reduced competition also helped buyers by bringing offers closer to list prices. Nationally, the average difference between winning offers and list prices fell from 1.4 percent above the list price to 0.9 percent in June.

""In welcome news for buyers, these developments suggest that the real estate market is embarking on a new, more balanced chapter,"" Haberle said. ""Furthermore, as the market rebalances, homebuyers are likely to be less inclined to use risky strategies like waiving an inspection or financing contingency in order to secure a deal.""

Reports were mixed across the country, however. While markets like Baltimore and Washington, D.C., saw bidding wars drop off by as much as 10 percentage points from May to June, areas like San Diego, Orange County, and Boston reported a ramp-up in competitive buying.