‘The Housing Market Is on a Sugar High’
September 9, 2020
Buyers continue to face fierce competition from a limited number of homes for sale, which continues to fuel bidding wars across the country. Daren Blomquist, vice president of market economics at Auction.com, told MarketWatch that “the housing market is on a sugar high brought on by government stimulus and a pandemic-fueled rush” toward housing.
As bidding wars send homes above asking prices, Blomquist says, “prospective buyers will be better positioned for success as homeowners if they understand that this sugar high will not last and make sure their decision to buy is grounded in longer-term factors that will affect their ability and willingness to commit to paying down a sizable amount of debt over the next 30 years.”
Over two-thirds of homes sold in July were on the market for less than a month, according to the National Association of REALTORS®.
“That quick-decision environment may challenge some buyers, especially first-timers who are new to the process,” says Danielle Hale, realtor.com®’s chief economist, told MarketWatch.
The real estate brokerage Redfin reported that nearly 55% of offers submitted by its agents faced a bidding war in August, marking the fourth consecutive month that more than half of offers encountered bidding wars. Some markets in coastal California and more affordable places like Sacramento, Calif., and Phoenix are seeing even higher percentages of bidding wars.
“The pandemic-driven trend of people moving away from densely packed cities toward more affordable and spacious regions means homes in places like Sacramento and Phoenix are becoming nearly as competitive as the Bay Area,” says Daryl Fairweather, Redfin’s chief economist. “Low mortgage rates are motivating home buyers who are thinking of moving to go through with it. I expect competition to continue picking up in more affordable parts of the country.”
Indeed, “the market is on fire,” says Lisa Padilla, a San Diego–based real estate professional with Redfin. “There just isn’t enough on the market to supply the huge demand for homes. … Anything on sale for less than $600,000 has multiple offers, and sometimes they’re getting more than 20 offers.”
Nationwide, 58% of homes priced between $600,000 and $800,000 faced a bidding war in August, the most competitive price segment, according to Redfin’s analysis.
“When the market started getting really hot a few months ago, at first we just saw the lower-priced homes selling fast with multiple offers,” says Marisa Frias, a real estate professional with Redfin in El Paso, Texas. “Now it’s nearly every home at every price level. I’ve had an uptick in young buyers ready to purchase their first home, and the market is tough for them. I always need to make sure they’re emotionally and financially prepared to face a bidding war every time they find a home that is ‘the one.’”
Bidding wars were highest in the following markets, according to Redfin’s analysis:
- San Francisco/San Jose: 65.2%
- Salt Lake City: 65.2%
- San Diego: 64.5%
- Washington, D.C.: 63.5%
- Seattle: 62.2%
- Minneapolis: 61.5%
- Boston: 60.8%
- Philadelphia: 59.1%
- Austin, Texas: 58.2%
- Sacramento, Calif.: 57.8%
- Phoenix: 56.5%
- Portland, Ore.: 56.3%
- Los Angeles,: 53.4%
- Tampa, Fla.: 50%
- Detroit: 50%
“ ‘The Housing Market Is on a Sugar High’: Home Sales Are Soaring, But Is It a Good Time to Buy? Here’s What the Experts Say,” MarketWatch (Aug. 24, 2020) and “More Than Half of Redfin Offers Faced Bidding Wars in August as the Housing Market’s Competitive Streak Continues,” Redfin (Sept. 4, 2020)
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Updated: September 18, 2020