January of 2022 is on record as the most competitive month ever for homebuyers, according to data released Wednesday from Redfin.
Seventy percent of home offers handled by Redfin agents faced bidding wars, up from 67.1 percent in December 2021 and 60 percent in January 2021, the highest rate since Redfin started tracking it in April 2020.
The report attributed the intense competition to buyers racing to close in advance of rising interest rates. January closed out with interest rates at 3.55 percent after ending December at 3.11 percent, while they now sit at over 4 percent. A year earlier, they sat at a record low of 2.65 percent.
Buyers are feeling pressure to close on deals before rates rise even further, but they’re being met by homeowners who feel no urgency to sell, knowing in many cases they, too, will face higher mortgage rates when they look for a new home, according to Redfin.
“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. “Buyers are battling it out for the few homes on the market in an effort to lock in relatively low payments before rates move even higher, but homeowners who bought or refinanced in the last year are staying put because they don’t want to lose their rock-bottom mortgage rate.”
The highest rates of bidding wars were seen in Spokane, Washington, a market once known for its affordability, where 83.3 percent of offers written by Redfin agents faced competition in January, according to the report.
“Competition really ramped up again in the second half of January because buyers started to feel desperate to lock down homes while rates were still relatively low,” Brynn Rea, a Redfin real estate agent in Spokane, said in a statement. “One of my listings just had 45 showings in five days and got 14 offers. Another received 12 offers and sold for $120,000 over the $525,000 list price.”
Following Spokane, Sacramento, California, had 80.4 percent of offers face competition, and Seattle, Washington, had 79.7 percent.
The rise in competition is having the most adverse effect on existing residents in popular relocation markets, who tend not to have as much cash as those looking to relocate.
“The rise in mortgage rates won’t be too detrimental for out-of-towners moving in with lots of cash, but it will push a lot of local first-time buyers out of the market,” said Rea. “I’m working with one couple purchasing their first house on a $230,000 budget with a VA loan and no money down. It’s essential that we get them into a home soon, or else they won’t be able to afford one. If that happens, they’ll need to keep renting, which is also challenging because their rental payment is more than their mortgage payment would be due to skyrocketing rents.”