It’s long been the norm for homebuyers in California to face steep competition from other would-be buyers, facing off and driving up prices over a diminutive supply of homes. But the tide is shifting in the housing market, here in California and across the U.S.
Nationally, 32% of offers written by Redfin agents needed to compete with multiple offers on the same property, as of November 2018. Just a year earlier, this share was a much higher 45%.
But, as usual, California exaggerates the trend.
Here, multiple offers on the same property — producing bidding wars — are still common across the state. For example, the top four spots in Redfin’s list of metro areas nationwide with the highest rate of bidding wars are claimed by California cities:
Even as bidding wars remain higher than average across California, the percentage of buyers facing competition from other offers is decreasing.
One of the steepest drops occurred in Los Angeles, where sales volume has dramatically slowed over the past year. The latest sales volume reports showing Los Angeles on track to end the year 8% below 2017. As homes sit longer on the market, buyers are finding more options available to them and competition is thinning out across more homes.
On the other hand, San Francisco has also seen a steep drop in bidding wars, but home sales volume has actually increased over 2017. The reason for the drop in bidding wars here may have more to do with the region’s rapidly increasing home prices than the boost in sales volume.
As of October 2018, San Francisco home prices are 8%-9% higher than a year earlier, compared to the 5%-7% average annual rise in California’s major metros. This rising price dynamic has pushed out first-time homebuyers and international buyers, according to the Mercury News. Therefore, while bidding wars are still fairly common in San Francisco, trends are pointing towards a continuing slowdown across the region’s market in 2019.
Declining bidding wars in 2019-2020
first tuesday expects the housing market to continue to cool in 2019-2020, meaning bidding wars will continue to become less common.
The market is on a one-way road towards recession in 2019, spurred along by rising interest rates and a teetering economy. Home sales will be on a downward track until prices bottom and interest rates cool. This will initially encourage speculators and other investors into the market, and then end user homebuyers.
Except for pockets of low-inventory, highly-desirable neighborhoods, the return of bidding wars on nearly every home sale won’t occur until the post-recession years of 2022 and onward.