Home sales are falling fast, causing bidding wars to disappear just as quickly, according to newly released findings from real estate brokerage firm Redfin.
In November, pending home sales had plunged by 35.1% year over year on a seasonally adjusted basis. That is the biggest drop in Redfin records, which date back to 2012.
Bidding wars also are on the wane. The share of home offers written by Redfin agents that faced competition in November was 40.4%, a drop of 26.9 percentage points from a year earlier.
In a summary of Redfin’s findings, Chen Zhao, Redfin’s economics research lead, says that while inflation is likely receding a bit, it’s a mistake to think housing will recover quickly:
“We do anticipate that mortgage rates will decline slightly further in 2023 as the Fed’s actions continue to bring inflation down, which should ultimately bring more homebuyers back to the market. Still, we have a ways to go until we reach recovery mode, and we may see sales continue to ebb in the short term.”
Following are the 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. Seattle
Share of Redfin listings in this metro that faced competition in:
November 2022: 24.5%
November 2021: 66%
As if those trying to sell their homes in Seattle don’t have enough problems, here’s one more: The city is No. 2 on the list of the “10 Cities Where ‘Porch Pirates’ Are Most Likely to Steal Packages.”
Matthew Gardner, chief economist for Seattle-based Windermere Real Estate, recently told a local radio station that while housing demand is soft right now, he believes the lack of housing supply in the area means prices will start rising again, “probably in the latter part of next year.”
9. Las Vegas
Share of Redfin listings in this metro that faced competition in:
November 2022: 23.7%
November 2021: 57.4%
Lee Barrett, incoming president of the Las Vegas Realtors Association, does not believe the sudden cooling in the local housing market will turn into a collapse.
As he recently told The Nevada Independent:
“The interest rate adjustment going up caused a contraction, but it’s a natural contraction. There always has to be change in the real-estate business. The sky is not falling. It’s just adjusting.”
8. Miami
Share of Redfin listings in this metro that faced competition in:
November 2022: 23.1%
November 2021: 55.2%
Don’t mistake a fall in bidding wars for a rise in affordability in Miami. A lack of inventory means it’s getting more expensive to buy or rent a home in the city.
As Florida Atlantic University finance professor Ken Johnson recently said in the Miami Herald:
“We have a huge number of Airbnbs that have taken long-term rentals off the market and made them available for short-term rentals. A lot of those are switching back to long-term rentals because rents are so high.”
6. Nashville (tie)
Share of Redfin listings in this metro that faced competition in:
November 2022: 22.2%
November 2021: 61.5%
Inventory growth is accelerating faster in Nashville than anywhere else, according to a recent report from RE/MAX. Sales also are down sharply.
Jeff Checko, director of relocation for Ashton Real Estate Group, told a Nashville TV station that the strength of the economy and the direction of interest rates will determine what happens next:
“If rates remain where they are, some hesitation will continue. Still, buyers will continue to accept the current situation and adopt some creative lending options offered by banks to spur activity. If inflation picks up and short-term rates have to respond with more hikes, all bets are off.”
6. Houston (tie)
Share of Redfin listings in this metro that faced competition in:
November 2022: 22.2%
November 2021: 50.3%
A “perfect storm of market conditions” has caused home sales to plunge nearly 30% in Houston, according to Houston Public Media.
However, Jennifer Wauhob, chair of the Houston Association of Realtors, told the outlet that it is important to keep the decline in perspective:
“The number of sales just went so high, that when you now compare a 30% drop, but you remember you’re comparing it to a year that was just completely abnormal, then it’s not so scary.”
5. Riverside, California
Share of Redfin listings in this metro that faced competition in:
November 2022: 20.5%
November 2021: 47.6%
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.
Last month, Oscar Wei, deputy chief economist for the California Association of Realtors, told 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.”
3. Tampa, Florida (tie)
Share of Redfin listings in this metro that faced competition in:
November 2022: 16.7%
November 2021: 59.3%
The housing market has cooled considerably in Tampa. It is among the “10 Markets With the Most Home Sales Getting Canceled.”
Looking to purchase a home of your own? Stop by the Money Talks News Solutions Center and search for a great mortgage rate.
3. Olympia, Washington (tie)
Share of Redfin listings in this metro that faced competition in:
November 2022: 16.7%
November 2021: 79.2%
In the fall, Olympia was named the 10th most expensive small city when it comes to rental costs.
Perhaps the dramatic fall in bidding wars bodes well for those hoping the cost of buying or renting a home will become a bit less expensive here.
2. Phoenix
Share of Redfin listings in this metro that faced competition in:
November 2022: 16.6%
November 2021: 51.8%
Housing activity has cooled dramatically in the desert. Andrea Crouch, president of Phoenix REALTORS, says prices are falling as mortgage rates rise.
However, she sees no reason to panic. She told AZ Big Media that “the bottom is not going to fall out by any stretch. It’s just turning into a more normal market, which is just fine.”
1. Orlando, Florida
Share of Redfin listings in this metro that faced competition in:
November 2022: 8.1%
November 2021: 61.7%
Orlando — which had an average daily high temperature of 74.2 degrees Fahrenheit last year — recently made our list of “10 Great Warm and Sunny Places to Retire in the U.S.”
With bidding wars virtually disappearing here, you might have a better shot now of nabbing your own piece of paradise.
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.
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.”