Surging mortgage rates, home prices are making it less competitive to buy a home
Homebuyer competition fell in March for the first time in six months as mortgage rates and home prices surged, a new Refin report found.
Last month, 65% of homes faced competition, down from February’s 67%, the first month-over-month decline since September. Redfin analysts said this is a sign demand is cooling as rising mortgage rates and home prices are prompting buyers to back out of the market.
And that drop in competition is a sign the housing market is starting to slow down. Redfin also found mortgage applications, home tours and online housing searches fell, and that more sellers are lowering their asking prices once homes are on the market.
Despite the cooldown, bidding wars are still more common than they were last year. March’s bidding-war rate was 69.3% down from February’s 71.9% but up from 62.2% in 2021.
Redfin chief economist Daryl Fairweather said while most homebuyers are still encountering bidding wars, competition is starting to cool.
“We expect bidding wars to ease further in the coming months as rising mortgage rates price more buyers out of the market,” he said. “That should provide some relief for people who can still afford to buy, as they’ll likely face fewer competing offers and may no longer need to offer drastically over the asking price in order to win. Unfortunately, the slowdown in competition won’t help those who have already been priced out of homeownership and are now grappling with soaring rental costs.”
Today’s average 30-year fixed mortgage is at 5.11%, the highest since 2010, up from a record low of 2.65% in January 2021. Home prices are up 17% from last year to a record $392,750, according to the report, increasing the typical mortgage payment up by more than 30%.
Boston has the second most competitive housing market, with a bidding-war rate of 79%, followed by Providence, R.I., at 78.3%, Worcester, Massachusetts, at 78.2% and San Diego, California, at 78.1%. San Jose took the No. 1 spot at 79.8%.
The report also found townhouses to most likely to see bidding wars, 72.4% of offers had competition in March, higher than any other property type. They were followed by single-family homes at 70.2%, multi-family properties at 68.1% and condos/co-ops at 62.6%.
The reason for the increased townhouse competition stems from homebuyers who’ve been priced out of the single-family home market.