January 2022 was the most competitive month ever for house hunters due to new families, remote workers, and rising mortgage rates according to Bloomberg.
“It’s been incredibly frustrating,” said Erin Damato, in an interview with Bloomberg. “House prices have gone up about $100,000 since we’ve been looking.”
Damato and her husband have been seriously hunting for a home in New Jersey since last fall to house their growing family. They are finding that even $1 million isn’t enough to meet their needs.
In January, the Damato family big $828,000 for a house that was listed at $750,000 in West Orange which is about 20 miles west of New York City. After placing that big, they learned from their real estate agent that of the more than 20 offers received, theirs wasn’t even in the top five.
It’s par for the course to lose out in a bidding war in the red-hot U.S. housing market. Millennials who are starting families, remote workers with location flexibilities and the concerns over rising mortgage rates are only adding fuel to the fire. About 70% of offers were in bidding wards up about 60% from the year before according to Redfin. It made January the most competitive month ever.
The average 30-year fixed mortgage rate was 3.92% in mid February. This is up from a record low 2.65% in early 2021. A $500,000 loan with a 30-year mortgage has a monthly payment of about $2,364. Last year’s low saw those payments at $2,014. Investors expect the Federal Reserve to hike interest rates several times this year to respond to soaring inflation though it doesn’t seem to be deterring buyers.
“Rising mortgage rates are intensifying an already-severe shortage of homes for sale because buyers are feeling more urgency to buy while homeowners are feeling less urgency to sell — an imbalance that’s fueling an increase in competition,” said Redfin Chief Economist Daryl Fairweather.
A combination of luck and resourcefulness are allowing some buyers to snatch up a house that was subject to bidding wars. In an interview with Bloomberg, Gianna Gordon said she big $235,000 for a home listed at $215,000 in Atlanta. According to Gordon, the offer was initially rejected in favor of an offer from an investor however when the offer fell through, Gordon was asked if she was still interested.
“You have to do a little bit extra to get the attention of the owner,” she said. Gordon offered to pay $800 in relocation expenses for the seller. She credits that creativity for sealing the deal. According to Redfin, many successful bidders are seeing similar results. Several homebuyers are shortening or waiving the inspection contingency and offering to increase their down payment if the appraisal comes in low.
Spokane, Washington; Sacramento, California; and Seattle have the highest bidding war rates of the 40 metro areas surveyed by Redfin. 83.3% of offers in Spokane saw a bidding war in January while Sacramento and Seattle saw 80.4% and 79.7% respectively.
Raleigh, North Carolina ranked ninth with 75% of offers receiving competition. Charlotte came in at number 17 with 72.5% of competing bids up from 66.7% in January 2021.