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In another sign the real estate market might be contracting, online real estate brokerage firm Redfin reported Monday that while 65% of home offers faced competition in March, that’s down from nearly 67% in February, making it the first month-over-month decline in competitive offers since September.
“Most homebuyers are still encountering bidding wars, but competition is beginning to cool because surging mortgage rates and home prices are prompting some Americans to back out or put their buying plans on hold,” said Redfin Chief Economist Daryl Fairweather. “We expect bidding wars to ease further in the coming months as rising mortgage rates price more buyers out of the market.”
According to Fairweather, there’s a silver lining to increased interest rates, suggesting homebuyers’ bids will face less competition.
“That should provide some relief for people who can still afford to buy, as they’ll likely face fewer competing offers and may no longer need to offer drastically over the asking price in order to win,” Fairweather said. “Unfortunately, the slowdown in competition won’t help those who have already been priced out of homeownership and are now grappling with soaring rental costs.”
Bankrate reported Tuesday that the average 30-year fixed mortgage is 5.42%, up 15 basis points in a week’s time. Just over a month ago, on March 25, Bankrate said the average 30-year fixed mortgage rate was 4.03%.
Redfin says home prices are up 17% year over year to $392,750.
Redfin also reports that San Jose, Calif., Boston, Providence, R.I., Worcester, Mass., and San Diego saw the highest bidding wars of the 36 metropolitan areas it surveyed in the United States.
The company reported that nearly three-quarters (72.4%) of Redfin offers for townhouses faced competition in March, a higher share than any other type of property. Just over 70% of single-family homes faced a bidding war.
“Many homebuyers have sought out townhouses because they’ve been priced out of the market for single-family homes,” Redfin said.