Individuals looking to purchase a new home in 2020 should brace themselves for the competition, according to a recent study by Redfin.
The incredibly low mortgage rates offered recently in conjunction with the lowest home inventory seen in the past seven years fiercely increased competition among homebuyers in January 2020 according to Redfin’s survey of over 500 Redfin agents across the U.S. in 52 different markets during the week of February 10, 2020.
“Low mortgage rates have brought buyers back to the housing market, but a lack of listings means buyers are having to compete with one another to secure a sale and lock in a mortgage rate,” Daryl Fairweather, Redfin chief economist, said in a statement. “This competition pushes up prices, which means that even though buyers can get a good deal on a mortgage now they are often paying a higher sticker price.”
A majority of Redfin agents who assisted homebuyers in January faced competition, with the San Francisco Bay Area posing the greatest amount. Although the median home price in this market is above $1 million, 90 percent of the time agents encountered multiple offers for homes on which their clients bid.
Agents across the country had stories to tell about the lengths to which buyers had to go in order to win a home.
“In Phoenix, inventory is so low right now that one of my clients has run into bidding wars with more than 10 offers for three weekends in a row,” Thomas Wiederstein, a Redfin agent based in Arizona, told Redfin. “Offering well above listing price isn’t enough in today’s market. You have to do that, plus waive contingencies just to have your offer considered by sellers.”
In San Jose, Redfin agent Jennifer Tollenaar reported, “In order to beat 24 other offers, [my clients] put 50 percent down, wrote a great letter to the sellers and removed all contingencies. This was on a home with a purchase price of over $1.7 million.”
Even among homes that had languished on the market for months, competition seemed to suddenly jump in January. Redfin noted that several agents reported such a phenomenon. In Philadelphia, for instance, Redfin agent Brenda Beiser reported helping her clients win a home that had been on the market since June 2019, but had suddenly received three simultaneous offers in January 2020 and a sharp increase in appointments to see the home.
Homebuyers seeking better chances in the foreseeable future will either need to hold out hope for an increased inventory soon, or start to think creatively about how to stand out from the competition.