The coronavirus pandemic caused a “frozen housing market” in the US last month. Many buyers and sellers were putting their real estate transactions on hold as states put strict social distancing and stay at home orders in place. This was despite the fact that real estate was deemed an essential business in many of these states. But now the restrictions are slowly being lifted across the country. And the coronavirus is bringing with it another real estate market trend: bidding wars. Bidding wars are back as homebuyers flood into the housing market.
COVID-19 Caused a Historic Drop in Homes for Sale
The main reason property buyers are currently caught in real estate bidding wars is because of the drop in the supply of homes for sale. In the second week of April, the number of new listings for homes for sale fell by half, compared to the same time a year ago – a historic drop.
Naturally, low housing supply and high demand from buyers has led to bidding wars. The heat is up in the real estate market for houses for sale priced under $1 million.
Redfin reported that more than 41% of homes saw a bidding war during the four weeks ending May 10. Compared to January 2020 when bidding wars were at just 9%, it seems the coronavirus and ultimately, the low supply has caused a massive jump in this trend. Taylor Marr, the lead economist at Redfin, commented on the current housing market trends:
Demand for homes has picked back up after hitting rock bottom in April, and that uptick paired with a lack of supply is a recipe for bidding wars. Homebuyers are getting back out there, searching for more space as they realize using their home as an office and school may become the norm.
So, Where Are the Sellers?
It seems that, while buyers are ready to jump back into the real estate market to take advantage of low mortgage rates, sellers are not sharing the same sentiment. The main reason is COVID-19: many sellers are worried about the ongoing impact the pandemic will have on the economy and home prices; others simply don’t want buyers touring their homes for fear of spreading or contracting the virus.
A few more real estate companies weighed in on the situation. The CEO of Compass, Robert Reffkin, noted that the site also saw a difference in the number of active buyers vs sellers:
There’s more buyer activity on our site, as defined by engagement with our agents around homes that they’re looking at, than there are new listings coming on our site, as defined by new listing inventory in the market.
Realtor.com reported that new listings for homes for sale dropped by 29% year over year for the week ending May 9. At the same time, this was a slight increase over the previous weeks, according to Danielle Hale, chief economist for realtor.com. She commented:
While new listings are still declining on a yearly basis, last week’s jump shows some sellers are ready for a summer home sale — a positive sign for the market. But despite this uptick, time on market continues to increase and there’s a long road ahead to getting back to last year’s pace of new sellers.
Bidding Wars by City
Here are the top 3 markets that had the largest share of bidding wars:
- Boston real estate market: 63%
- San Francisco real estate market: 63%
- Fort Worth real estate market: 62%
San Jose and Providence were also among the cities that saw the highest amount of bidding wars.
Ready to Get Back into the US Housing Market?
If you’re a real estate investor looking to get back into the real estate market, then check out these resources on finding investment properties for sale in a tight market and winning real estate bidding wars:
Searching for Property in a Low-Inventory Real Estate Market
This Is How to Win a Real Estate Bidding War
Tips on Buying an Investment Property in a Seller’s Market
You can also take advantage of this Mashvisor promo code for 15% off all Mashvisor plans. This will give you access to the real estate investment tools you need to find and analyze real estate deals quickly, before other buyers and investors.
Sign up now to Mashvisor to stay updated on real estate news around the US.