Homebuyers are less likely to get into bidding wars now that the housing market has cooled off a bit.
During the first three weeks of March, a mere 16 percent of buyer offers written by real estate brokerage Redfin faced a bidding war. That is a sharp drop from the 61 percent a year earlier. Redfin operates in more than 85 major U.S. metropolitan markets.
Homes are also staying on the market on average two days longer than during February 2018. This is the largest annual increase since January 2015 and the first annual increase in February since 2011. February generally marks the start of the spring housing market.
Of course, competition varies by market. While San Francisco, Boston, San Diego and Portland, Oregon, see about 1 in 5 offers in a bidding war, those are all down from over 65 percent of offers a year earlier.
"At this time last year, in cities like San Francisco, Seattle and Boston it was rare for a home not to receive multiple offers. The tide has turned," said Daryl Fairweather, Redfin's chief economist. "Since the market began to cool down last fall, the number of homes for sale has grown each month, giving buyers more options and more negotiating power. Buyers are searching with less urgency and more frequently able to win offers with contingencies."
Seattle, which has been one of the nation's most competitive markets, with prices rising by double-digit percentages for several years, is cooling dramatically. Just 17 percent of offers written by Redfin involved bidding wars, down from 72 percent a year earlier.
The least competitive markets so far in March are Miami, Dallas and Houston. These markets were much hotter last year.
The housing market began cooling last summer, as home prices had overheated and mortgage rates were rising. Mortgage rates peaked in November, and sales suffered dramatically. Price gains have now been shrinking for 10 straight months nationally, and mortgage rates have fallen sharply since November, with rates now lower than they were a year ago.
Improving affordability may bring more buyers out as the spring season heats up. Homebuilders are reporting increased buyer traffic, and mortgage applications to purchase a home surged last week as rates plummeted.
"We continued to see choppiness in the marketplace during our first quarter," said Lennar's Stuart Miller. "However, during the quarter, mortgage interest rates subsided and ultimately pulled back, and home prices moderated, providing a catalyst for the new home market to correct itself."
There is slightly more supply on the market now. Inventory of homes for sale at the end of February was 3.2 percent higher annually, according to the National Association of Realtors.
The supply of lower-priced homes for sale is still tight, however. As the market gets busier this spring and more buyers look to take advantage of lower mortgage rates, bidding wars will likely increase.