Fears of a recession are starting to affect homebuyers’ confidence, driving the rate of bidding wars to an eight-year low, according to a new report by Redfin.
Just 10.4% of Redfin customers faced a bidding war in August, down from more than 42% at the same time last year. August’s 10.4% bidding-war rate beats out July’s 11.4% as the lowest rate since 2011.
The rate of bidding wars has been sliding since reaching a peak of 59% in March of 2018. However, Redfin chief economist Daryl Fairweather blamed the latest drop on consumer fears that the economy might be headed for a slump – fears that even low mortgage rates haven’t been able to assuage.
“Despite remaining near three-year lows, mortgage rates have failed to bring enough buyers to the market to rev up competition for homes this summer,” Fairweather said. “Recession fears have been enough to spook some would-be buyers from making the big financial commitment of a home purchase. But assuming a recession doesn’t arrive this fall or winter, consumers will likely adjust to the new ‘normal’ of continued volatility in the stock and global markets, and the people who need and want to make a move will take advantage of low mortgage rates. As a result, I still expect homebuying competition to pick back up in the new year.”
The San Francisco market was the most competitive in August, with 31% of offers written by Redfin agents facing a bidding war. Although that’s more competitive than every other major US market, it’s a huge drop from the 73.5% rate recorded a year earlier.
San Francisco was followed by San Diego, which recorded a bidding-war rate of 18.4%. Las Vegas (17.1%), Boston (15%) and Los Angeles (14.4%) rounded out the top five.
Atlanta was the least competitive market, with a bidding war rate of 2.4%. It was followed by Miami (3.1%), Raleigh (4.2%), Philadelphia (4.3%) and Chicago (5%).