The market is showing signs of easing off the frenzied pace seen in recent months. Mortgage application purchase demand has slowed slightly, primarily due to affordability constraints from high home prices, said Sam Khater, Freddie Mac’s chief economist.
However, “with inventory tight, the slowdown in demand has yet to impact prices, meaning the summer will likely remain a strong seller’s market,” Khater added.
Also, 70% of home offers still faced a bidding war in May, according to a new report from Redfin that analyzes offers written by its agents. But that is down from 74% in April.
Could housing be following a normal trend? Historically, competition tends to taper in early summer following the spring homebuying season.
Home buyers have faced high competition and high home prices during the pandemic because of the tight inventory of homes.
“The housing market was going 100 miles per hour and now it’s down to 80,” said Daryl Fairweather, Redfin’s chief economist. She believes competition has already hit its peak and will continue to level off.
“After months of surging prices and low inventory, some house hunters are moving to the sidelines—either because they’re priced out or burned out,” Fairweather said. “Americans are spending more of their money on things like travel and dining out now that pandemic restrictions are being lifted.”
The Redfin analysis tracked 50 metro areas and found the areas with the highest bidding war rates nationwide in May were in the following areas:
- Spokane, Wash.: 86.7% of offers written by Redfin agents faced competition in May
- Raleigh, N.C.: 84.5%
- Tucson, Ariz.: 81.8%
- Salt Lake City: 81.5%
- Charleston, S.C.: 79.3%
In San Diego, the bidding war level was 74.6% in May, down from 86.2% in April. That was the largest month-over-month decline in the analysis.
“Competition is still high, but the good news is buyers are having to make fewer offers to win bidding wars,” says John Copeland, a Redfin real estate pro in San Diego. “A few months ago, buyers were bidding on three to five homes before winning. Now it’s more like one to two. Part of that is buyers grasping the reality of the market: They’ve become more educated about what they need to do to win, so they no longer need to make as many offers.”