The dip in competition can be attributed to the increase in mortgage rates, which reached 5.3 percent in May after starting March at just 3.76 percent.
Homebuyer competition saw its second straight month of declines in April as rising mortgage rates take their toll on the housing market, according to a new report.
The report from online brokerage Redfin found that just 60.7 percent of home offers crafted by Redfin agents encountered competition in April — the lowest level since March 2021. The month before, 63.4 percent of Redfin agents’ offers received competition, while March 2021 saw 67.4 percent of offers face competition.
The dip in competition can be attributed to the increase in mortgage rates, which reached 5.3 percent in May after starting March at just 3.76 percent, bringing the typical monthly mortgage payment for homebuyers up a record 44 percent year-over-year to an all-time high of $2,427.
Higher rates are limiting not only competition, but also the amount homebuyers are willing to pay, which could bring about a slowdown in price growth, according to Redfin economists.
“The meteoric rise in mortgage rates is prompting more house hunters to back out of the market, causing competition to cool,” Redfin Chief Economist Daryl Fairweather said in a statement. “Higher rates are also limiting homebuyers’ ability to significantly bid up home prices, meaning some homes aren’t selling for as much over the asking price as they would have a year ago. This could help set off a slowdown in home price growth in the coming months.”
Redfin data scientists found that competition had decreased the most in Riverside, California, where 42.7 percent of home offers written by Redfin agents faced competition in April, down from 64.6 percent the year prior.
Riverside also had the lowest bidding war rate, according to Redfin. Atlanta recorded the second biggest decline, with 56 percent of offers facing competition versus 71 percent in 2021. Olympia, Washington, rounded out the top three with 70 percent of offers coming up against competition in April 2022, down from 85 percent of offers in April 2021.
“Homes that would have received 10 offers several months ago are now getting two or three. That’s because the jump in mortgage rates has forced a huge pool of first-time buyers to drop out,” Elizabeth Rodriguez, a seller’s agent with Redfin in Riverside said in a statement. “The buyers who are still in the market are those who are less sensitive to mortgage rates because they have big cash reserves.”