For more than a year, the homebuying market has been tilted to heavily favor sellers. Recent signs suggest a turning point has been reached.
For more than a year, sellers have held the high ground in the housing market. Competition between buyers fueled bidding wars, leaving sellers to sit back and pick the offer best suited their needs.
But the bidding war boom seems to have hit its peak in April, suggesting buyer fatigue and increasing inventory may finally slow a hot sellers streak.
According to Redfin, the share of Redfin homes that faced one or more competing bids hit a pandemic-era peak of 74.1% in April 2020. That’s an increase of nearly 30 percentage points from April 2020, when the share of home facing bidding was around 45%.
The rate eased to 72.1% in May and then took a sharper dive to 65% in June -- the largest month-over-month decrease since April 2020.
It is common for bidding wars to decline following the spring buying season, but Redfin also cited increasing inventory and buyers leaving the market due to high prices or fatigue after losing bidding wars.
Another promising sign for homebuyers is the share of active listings with price drops has increased every week since March 4 and have exceeded 2020 levels for 3 straight weeks.
According to data from Redfin, 4.3% of active listings in all Redfin metro areas had a price drop in the final week of June, up from 3.7% a year ago.
In the Seattle metro area, for example, price drops increased 12 percentage points from April to May -- the sharpest increase since at least 2012, when data collection began.
Price drops tend to increase throughout the summer and peak in the fall. But the national percentage peaked at 12.8% in January in 2020 and plateaued throughout the pandemic until presumably bottoming out at 6.6% in February 2021.
From that low, the national percentage increased to 7.9% in May -- the second-largest three month increase since June-August 2019.
While not overwhelming, it’s a sign that this market is not unbreakable, as it seemed for some time. And it suggests that price drops will return to their normal pattern of rising to a peak in the fall.
Increasing price drops and decreasing bidding wars are welcome signs for fatigued homebuyers. However, it should be noted that both are returning from extreme levels and, at best, signify baby steps toward a new normal.
But with demand cooling and inventory increasing, these buyer-friendly trends are likely to continue, if not accelerate.