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Bidding Wars Are Cooling Off, New Data Shows

Bidding Wars Are Cooling Off, New Data Shows
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Home.com Contributor

Bidding wars for homes are cooling off, according to new data from real estate broker Redfin.

About 60% of Redfin’s clients faced competition when they made an offer to buy a home during July, down from 66.5% a month earlier.

That’s still a high number, but it’s lower than the nearly 75% competition rate buyers faced back in April, at the height of the pandemic housing boom.

This decline in bidding wars — paired with a 7.3% increase in housing inventory during July — paints a welcome picture for homebuyers in the second half of 2021: It could be a little easier to get an offer accepted.

Behind the numbers: Cooling competition among buyers

On the surface, the number of bidding wars on homes have stayed about the same over the past year. July’s 60% competition rate is still higher than the 58% Redfin reported in July of 2020.

Dig a little deeper, though, and you’ll see more signs of change.

Redfin defines competition rate as the number of purchase offers that face competition from at least one other potential buyer. Whether you’re competing with one other buyer or 50 other buyers will look the same in the data.

But Redfin agent Scott Mercer, in Sacramento, Calif., says he’s seen a big change even when listings do attract more than one buyer, especially when compared to market conditions in April.

Back then, offers were coming in at $50,000 to $60,000 above the asking price, Mercer said in Redfin’s report. In July, listings were attracting offers more like $5,000 to $10,000 above asking.

Plus, Mercer said, buyers now seem more comfortable asking for seller concessions compared to a few months ago when some buyers were giving up on even hearing back from a seller.

The cooldown isn’t spread evenly

As with most real estate metrics, location matters when you’re measuring competition among buyers.

While the national trends show competition is cooling off, some local markets are outliers.

Top 5 cities for homebuyer offer competition

Of the 47 metro areas in Redfin’s report, competition was fiercest in Fort Collins, Colo., and Orlando, Fla., where more than three out of four buyers faced competition from other buyers, and where competition increased compared to a month earlier.

City July 2021 competition rate June 2021 competition rate
Fort Collins, Colo.77.3%63.2%
Orlando, Fla.77.0%71.1%
Nashville, Tenn.74.6%74.0%
Honolulu, Hawaii74.1%70.0%
Colorado Springs, Colo.73.2%43.3%
Source: Redfin

Bottom 5 cities for homebuyer offer competition

Buyers in New Orleans, Richmond, Va., and Cleveland, Ohio, were more likely to have the seller’s full attention when they made an offer in July. Competition in these areas cooled significantly compared to June’s numbers.

City July 2021 competition rate June 2021 competition rate
Miami, Fla.46.8%52.8%
New York, N.Y.43.2%56.5%
Cleveland, Ohio38.7%56.7%
Richmond, Va.38.5%61.5%
New Orleans, La.35.0%56.0%
Source: Redfin

Other notable markets

In most larger markets, fewer buyers faced competition in July compared to numbers from June.

City July 2021 competition rate June 2021 competition rate
San Francisco/San Jose, Calif.66.3%71.4%
Philadelphia, Pa.63.0%64.2%
Los Angeles, Calif.61.8%67.6%
Seattle, Wash.59.5%71.8%
Atlanta, Ga.57.1%58.0%
Source: Redfin

Still a seller’s market

Less competition, more inventory, a dip in the median price of homes — these are encouraging signs for people who want to buy a new home this year.

Compared to ordinary times, though, housing markets remain tight, and getting an offer accepted is still difficult in many places, especially for first-time homebuyers.

To compete, get a preapproval from a reputable lender. A solid preapproval tells the seller you’re serious and that you can complete the purchase.

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