Study: Bidding Wars Here to Stay

March 11, 2015

The housing bubble was known for bidding wars, as buyers tried to snag a limited number of homes for sale and sent home prices soaring way over list prices. In the aftermath of the housing crisis, bidding wars still haven’t disappeared in some markets—and they aren’t likely to go away anytime soon, new research suggests.

Prior to the housing bubble, about 3 to 4 percent of homes on the market nationwide were sold in bidding wars, according to new research published in the journal Real Estate Economics. Researchers evaluated National Association of REALTORS® data dating back to the 1980s. During the peak of the housing bubble, nearly 30 percent of homes in metro Washington, D.C. were selling via bidding wars – the highest share of any other metro analyzed. In Los Angeles, 26 percent of the homes sold via bidding wars during this time; 23 percent in Las Vegas; and 22 percent in Baltimore and Norfolk, according to the study.

Since the housing crisis, the percentages have dropped considerably, but still remain elevated, according to the analysis.

“The persistence of this suggests that people have decided that this is a good way to think about selling these kinds of goods, selling houses in a more auction-like way,” says William Strange, an economist at the University of Toronto’s Rotman School of Management, and one of the co-authors on the study.

It’s not just in areas with limited inventories of homes for sale that are seeing bidding wars either, researchers note. But they also suggest that real estate professionals may be strategically listing homes below their value to spur bidding wars.

“With the rise of bidding wars, we shouldn’t think that the housing market – like other markets – is just going to keep doing things in the old traditional ways forever and ever,” Strange told The Washington Post. “There are going to be changes.”

Source: “A Legacy of the Housing Bubble That Won’t Go Away: Bidding Wars,” The Washington Post (March 10, 2015)