The current housing shortage is becoming a major issue for homebuyers as the spring buying season kicks into gear. According to Redfin, 60.9% of home offers written by Redfin agents nationwide, faced bidding wars in February. That's up slightly from 59.3% in January, according to a report.
"The uptick in mortgage rates is likely fueling more bidding wars in the short term because house hunters are rushing to buy homes before rates rise even further," said Redfin chief economist Daryl Fairweather. "If mortgage rates move significantly higher, we'll likely see some buyers move to the sidelines, which will curb competition in the long run."
According to a recent Redfin survey, 17% of people would slow down their home searches if mortgage rates surpassed 3.5%.
"Every home I put on the market for under $700,000 is selling in a day," said Redfin Jacksonville, FL real estate agent Heather Kruayai. "I recently listed a three-bedroom single-family house in Durbin Crossing that got 30 offers. I've never seen that in my life. We had to stop showings because the sellers just couldn't accommodate that many people coming through their house. Buyers were calling me up themselves and pleading with me to pick their offers. My client ultimately chose the bidder who had the highest offer and agreed to pay the difference if the appraisal came in lower than the contract price."
With many Americans moving to more affordable places during the pandemic, Jacksonville has seen an influx of out-of-state buyers who can afford to offer far above sellers' asking prices, Kruayai added. This has contributed to a surge in home value. The total worth of homes in the Jacksonville metro area was $165.9 billion in February, up 21.1% from a year earlier. That's the biggest increase among the 50 most populous U.S. metros.
Redfin also revealed that Salt Lake City, San Diego and Phoenix were the most competitive markets, high-end homes were most likely to attract bidding wars and single-family homes were much more competitive than condos.
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