Cooler weather historically means a cooling off period in the housing market, but that is not the case this fall. After dropping to the lowest level in eight years, bidding wars are creeping back.
In September, 11% of offers written by Redfin, a national real estate brokerage, faced a bidding war. That is down dramatically from 41% a year ago, but up from the 10% reading in August.
That might not seem like a big deal, but in the past four years, the bidding war rate has dropped — not increased — from August to September.
The bidding war rate usually falls about 15 percentage points from the height of the housing season in March to the beginning of the slow season in September, at least according to seasonal patterns from 2013 to 2018.
That has not been the case this year. The rate fell just 4 percentage points during that same period. Part of the reason for that is that the spring season was unusually slow, so there was no great height from which to decline. High home prices, higher mortgage rates and low supply kept competition at bay, even though housing demand is still elevated.
"After the coolest spring home-selling season in at least eight years, homebuying competition didn't have far to fall, but low mortgage rates ultimately drove a modest uptick in bidding wars in late summer when they typically become less common," said Redfin's chief economist, Daryl Fairweather. "With mortgage rates likely to remain near historic lows, I expect the bidding war rate to continue to level off—rather than follow its typical end-of-year descent—as 2019 comes to a close."
The increased heat in housing is also showing up in prices, where the gains had been decreasing all year. Now some reports have home price gains increasing again, or at least flatlining.
Low mortgage rates are fueling that heat, giving buyers more purchasing power and more incentive to hurry into a home before rates rise again. The average rate on the 30-year fixed is now more than a full percentage point lower than it was last fall.
San Francisco continues to be the most competitive market, with a 28% bidding war rate. Las Vegas and Phoenix tied for second with 21% of offers facing a bidding war.
The least competitive market in September was Miami, with a 2% bidding war rate and then Dallas and Austin, Texas, at 3%.