Bidding wars for houses begin to fade
Redfin: Economic uncertainty, sticker shock take sellers out of the game
Home sellers had it made back in March when 76% of offers submitted through real estate brokerage Redfin resulted in a massive bidding war among potential buyers.
Redfin economist Ellen Haberle remembers those days well.
"It was common to hear stories of people bringing in 30 or 40 offers," she said of the spring-selling season, "but now, they are lucky to get two."
The reality is times have changed, and the bidding wars have given way to a more subdued market in September – one in which only 58% of Redfin offers land in a such a situation.
Experts attribute the mild slowdown to seasonal trends, rising interest rates and uncertainty about the overall economic landscape in September.
From Haberle’s point of view, the 2013 real estate market looks a bit schizophrenic at times—pulled in different directions by uncertain Fed policy, a gridlocked government and consumer fears.
"This has been an unusual situation because not only did buyers flood the market in the fall of 2012, we saw a peak in activity in the spring and summer," said Haberle. But all of that activity began to taper off as buyers lost confidence in the overall economy, and the real estate community felt the seasonal impact that generally accompanies the shift from summer-to-autumn home sales.
"This year was kind of front-loaded, buyers rushed in earlier than they usually do and competition was fierce for homes in the spring," explained Haberle.
But by mid-summer, rising rates and concerns of a slowdown in the Federal Reserve’s mortgage-bond buying program, sent chills through the real estate market.
Buyers, at the time, also faced the beginning stages of sticker-shock as rates and prices began to rise on news that a tapering could take effect.
"What we are seeing now is a clear market correction from that – on top of seasonal trends," explained Haberle.
Redfin’s latest Real-Time Demand Pulse report shows home tour requests remaining flat from August to September, while offers on homes declined 11.8% — the steepest drop of 2013.
Compared to September 2012, the market is showing signs of a significant slowdown, considering offers on Redfin homes actually grew 4.5% during the same month last year.
Even after the Fed sent a dose of optimism into the market by announcing plans to delay its tapering of mortgage-bond purchases, home offers still fell 0.3% from the previous week after the plans were announced. This occurred even as interest rates eased, declining from 4.5% to 4.3%, Redfin noted.
"Last year homebuyers recognized that home prices were bottoming out, and with record-low interest rates and signs that the recession was ending, consumer confidence was high," said Aaron Drucker, Redfin’s New York market manager. "Today our clients are concerned about fluctuating mortgage rates as well as the government shutdown and debt ceiling battle. When people feel uncertain about their wealth and the economy, buying a home falls to the bottom of their to-do list."
The same day that Redfin pointed to a potential market slowdown, FNC released its latest FNC Residential Price Index, showing home values inching up 0.7% in the month of July as foreclosure sales and new defaults declined. By July, foreclosure sales across the nation were almost back to pre-crisis levels, FNC said. The latest August median sales-to-list price ratio rose to 97.2, up from 93.9.
Still, the latest data from FNC is from mid-to-late summer, with the firm expecting a decline in price mometum as the market moves into the fall/winter selling season. The numbers are already showing a decline in pricing.
"The latest September median sales-to-list price ratio edged lower to 96.2 – a 3.8% listing price markdown among closed sales, down from 97.2 in August," FNC said.