Mortgage rates soared in October — and buyers promptly disappeared from the housing market, according to newly released findings from Redfin.
Pending home sales plunged by 32.1% year over year last month. That is the biggest drop since Redfin began collecting data in 2013.
Price cuts and deal cancellations also set new records, according to the real estate brokerage. With competition from other buyers evaporating, bidding wars — which occur when at least two people bid on a home — also have been on the wane.
In a summary of Redfin’s findings, Chen Zhao, Redfin’s economics research lead, says:
“The Fed’s actions to curb inflation are causing the housing market to slow at a pace not seen since the financial crisis.”
Recent signs point to inflation cooling, which could cause demand for homes to turn up again soon, Zhao says. But for now, demand is diminishing — especially in the following 10 markets, where bidding wars are disappearing faster than anywhere else.
The ranking was limited to metros in which Redfin agents submitted an average of at least 50 offers per month between March 2021 and March 2022.
10. Denver
Share of Redfin listings in this metro that faced competition in:
- October 2022: 27.2%
- October 2021: 62.3%
Over the past several years, Denver was one of the hottest housing markets in the U.S. But things are changing quickly.
As Gene Myers, chairman of Thrive Home Builders in the Denver area, tells CNBC:
“It is definitely a hard landing for housing. Any hope of a soft landing really evaporated last spring, when it became so clear that our customers who are accustomed to such low mortgage rates just were going to go on strike.”
9. Las Vegas
Share of Redfin listings in this metro that faced competition in:
- October 2022: 26.4%
- October 2021: 44.4%
The housing market is pulling back in a big way in Sin City. In a press release, Brandon Roberts, president of Las Vegas Realtors, says:
“Prices have been going down slightly since we hit our all-time peak in May. We’re seeing more homes on the market, and fewer homes are selling. Through October, local home sales are down about 22% from this time last year.”
8. Raleigh, North Carolina
Share of Redfin listings in this metro that faced competition in:
- October 2022: 25.8%
- October 2021: 73.7%
The big decline in the number of bidding wars in Raleigh is a clear indicator of how far the mighty U.S. housing market has fallen over the past several months.
A recent forecast by mortgage lender Knock suggests that the city will slide out of “seller’s market” status by September 2023.
7. Tampa, Florida
Share of Redfin listings in this metro that faced competition in:
- October 2022: 25%
- October 2021: 62.7%
The big chill has arrived in Tampa. Amy Heckler, a local broker with Heckler Realty Group, tells a local TV station:
“In January, we had buyers offering to pay tens of thousands of dollars over appraised value, even offering to bring cash to the table, to now sellers are offering to pay points for buyers towards their mortgage interest rates.”
6. Charlotte, North Carolina
Share of Redfin listings in this metro that faced competition in:
- October 2022: 24.4%
- October 2021: 54.4%
Charlotte is one of many markets where stiff buyer competition was the norm not so long ago. In October of last year, more than half of home purchases ended up in a bidding war.
Today, that number has dropped to less than one-quarter of listings.
5. Riverside, California
Share of Redfin listings in this metro that faced competition in:
- October 2022: 24%
- October 2021: 53.5%
Nobody will mistake Riverside home prices for a bargain, at least when compared to values in other parts of the country. Yet, as prices fall and competition fades, opportunities grow for some California buyers.
Oscar Wei, deputy chief economist for the California Association of Realtors, tells a local TV station:
“Even within Southern California there are areas that are more affordable than others like Riverside, San Bernardino; they’re probably a little bit more affordable compared to L.A., Orange County and San Diego.”
4. Orlando, Florida
Share of Redfin listings in this metro that faced competition in:
- October 2022: 23.2%
- October 2021: 57.3%
Orlando is one of the “10 Markets With the Most Home Sales Getting Canceled.” That newfound lack of interest in local homes means bidding wars are disappearing fast.
Julia Bell, a branch leader at Movement Mortgage, tells a local TV station:
“We are in a very normal interest rate environment. What this does for potential buyers is gives them the opportunity to have the upper hand.”
3. Phoenix
Share of Redfin listings in this metro that faced competition in:
- October 2022: 22.1%
- October 2021: 53.5%
A year ago, more than half of home sales in Phoenix involved bidding wars. Now, it is less than one-quarter.
Tina Tamboer, senior housing analyst at the Cromford Report, recently told AZ Big Media that Phoenix has become a buyer’s market. But she adds that “we’re not plummeting” and that she’s “still feeling pretty optimistic” about the market’s future.
1. Colorado Springs, Colorado (tie)
Share of Redfin listings in this metro that faced competition in:
- October 2022: 11.1%
- October 2021: 65.3%
Home sales have been sinking for five straight months in Colorado Springs, and hundreds of sellers have cut their asking prices in recent weeks, The Gazette newspaper reports.
Joe Clement, broker-owner of Re/Max Properties in Colorado Springs, tells the newspaper:
“It’s just a different market than we got spoiled with, with people fighting over houses. We don’t have that, with these interest rates.”
1. Nashville (tie)
Share of Redfin listings in this metro that faced competition in:
- October 2022: 11.1%
- October 2021: 58.5%
Recently, Moody’s declared that Nashville housing prices were overvalued by 63.14%. That made the city one of “14 Markets Where Home Prices Could Plummet by 30%.”
If the sharp drop in bidding wars is any indication, buyers might already be getting cold feet here.
How to win a bidding war
While the number of people competing for homes has fallen in many markets, there are still plenty of properties that generate multiple offers.
Across the nation, townhouses are the type of property most likely to provoke bidding wars: 44.1% of all such Redfin offers met with a bidding war in August.
Redfin says townhouses are especially popular because they don’t cost as much as single-family homes.
Here are the percentages of bidding wars for other types of homes:
- Single-family homes: 42.1%
- Multi-family properties: 40.2%
- Condominiums: 37%
If you plan to buy a home, prepare for the possibility of a bidding war by learning the tips in “5 Ways to Beat the Hot Housing Competition.”
Chris Kissell
Source link
