What's Going On with Bidding Wars?

In a strong seller’s market, like the one we haveexperienced over the past few years, bidding wars are common andexpected. This makes sense! Aseller’s market is defined as a market in which the inventoryof homes for sale cannot satisfy the number of buyers who want topurchase a home.

According to the Cambridge English Dictionary, bidding warsoccur when two or more parties repeatedly outbid each other as theycompete to purchase something- in this case, a home.

In some areas of the country, first-time buyers have been metwith fierce competition throughout their experience. Some have beenout-bid multiple times before finally winning a bid on a home tocall their own.

According to the latest Existing Home SalesReport from the National Association ofRealtors (NAR), there is currently a 3.7-month supply ofhomes for sale.

With the current number of houses listed for sale and the levelof demand from buyers, this means it would take 3.7 months for allthe homes listed to sell if no additional listings came to market.Any supply number under a 6-month supply is considered aseller’s market. According to NAR, the housing markethasn’t had a 6-month supply of homes for sale since August2012.

Good News for Buyers

A recent report shows that the percentage of housessold including a bidding war before settling on a final pricedecreased from 53% in January of 2018 to 13% this year.

One reason for the decline is an influx of homes being listedfor sale. Even though the month’s supply number is notincreasing, the number of homes for sale is. The chart below showsthe year-over-year change in inventory overthe last 12 months.

As you can see, the number of homes for sale has started tobuild over the last eight months. Prior to this reversal, inventorylevels had fallen for 36 consecutive months when compared to theyear before.

Danielle Hale, realtor.com’s ChiefEconomist, gave some insight into why bidding wars are lesscommon on a local level this year,

“[Last year] you might have been the only listing inyour neighborhood, and you could put your home up at a certain listprice and you would likely see multiple offers at or above thatlist price. That tide is turning this year.

It’s going to depend on what neighborhood you’rein, but we expect it to be more common this year that youwon’t be the only listing.”

Inventory in the luxury and premium markets (the top 25% oflistings in an area by price), is increasing at a greater rate thanthe starter home market. As the choices buyers have continued toincrease, the likelihood of a bidding war will decrease.

Bottom Line

If you are debating listing your house for sale this year, youmay not want to wait for additional competition as inventorycontinues to rise.