Homebuyer competition decreased for the first time in six months in March, according to a report from Redfin published Monday.
The report found that 65% of home offers written by Redfin agents in the 36 metropolitan areas analyzed faced at least one competing bid, down from 66.7% of offers in February. This is the first month-over-month decline since September.
Despite the decrease, the bidding-war rate remains higher than it was a year prior when 62.2% of offers submitted by Redfin agents faced competition.
“Most homebuyers are still encountering bidding wars, but competition is beginning to cool because surging mortgage rates and home prices are prompting some Americans to back out or put their buying plans on hold,” Redfin chief economist Daryl Fairweather said in a statement. “We expect bidding wars to ease further in the coming months as rising mortgage rates price more buyers out of the market. 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.”
In the past few weeks, mortgage rates have risen to their highest level in a decade as the Federal Reserve seeks to combat inflation. In addition, home prices have continued to increase, with the median home sales price rising 17% year over year to $392,750 during the four weeks ending on April 17.
San Jose, CA had the highest bidding-war rate in March with 79.8% of Redfin offers facing competition, followed by Boston at 79% and Providence, RI at 78.3%.
While homebuyers in other major metropolitan areas are still facing competition, according to Redfin, fewer homebuyers have requested the services of Redfin agents in in San Francisco, Los Angeles, Washington, D.C., Boston and Seattle at the beginning of this year compared to a year ago. In addition, in San Francisco, the average number of offers on a property was 7.8 in March, down from 10 offers a year prior.
On the other end of the spectrum, the metro areas of Riverside, CA (53.9% down from 67.3% in February), Nashville, TN (57.1% down from 74.0% in February) and Honolulu, HI (59.0% down from 63.5% in February) saw the lowest bidding-war rates of all the metro areas analyzed in March.
The report found that offers on townhouses faced the most competition in March, with 72.4% of Redfin offers facing competition. In comparison, offers on single-family homes had a bidding war rate of 70.2%.
While the dropping bidding war rate is one indicator of a cooling market, data also shows that mortgage applications, home tours and online housing searches are also declining. Additionally, more home sellers are lowering their asking prices after putting their homes up for sale.
“March was the first month in two years that I had a weekend with zero house tours. People are getting priced out,” Maria Giron, a Redfin real estate agent in the Bay Area said in a statement. “Some buyers are in shock and dropping out altogether. Others are looking at more affordable options like smaller homes or neighborhoods that are farther out. Homes are still getting multiple offers, especially in desirable areas, but those in other areas are now seeing fewer offers than they were a couple of months ago.”