2022 Boise Idaho Real Estate Blog

Bidding Wars are Becoming More Common in the COVID-19-Induced Real Estate Boom

Main Treasure Valley Life

Just a few months ago when COVID-19 lockdowns were imposed across the United States, many parts of the economy slowed down, people lost their jobs, and many people didn't leave their homes. As restrictions have lifted, one industry has seen a faster nationwide recovery than expected: real estate.

Even as the country slipped into a recession, there has not been another housing crisis. In fact, the national real estate market is booming. However there is still a national housing shortage—made worse by the Coronavirus slowing down new home building—which is leading to bidding wars on what houses are already built. Here is a short breakdown of what is happening now in real estate.

Interest rates are at historic lows

The Federal Reserve has dropped interest rates to 3%, the lowest rates on record. This has triggered a wave of current homeowners to refinance their mortgages, and convinced those on the fence about buying a home to pull the trigger. However, due to the economic and public health concerns, lenders are requiring higher credit scores and proof that the borrower’s income won't go away and has been stable for around a year. This is to prevent a mass defaulting on mortgages, which triggered the 2008 recession.

The low interest rates have enticed more first-time homebuyers to enter the market. One characteristic of first-time homebuyers is using loan assistance programs to help get a mortgage for a smaller down payment, since they have no equity to draw from. According to a Zillow report, only 43% of Americans who bought home in 2018 had a down payment of 20% or more.

All of these applications and extra precautions have slowed down approval times, so be patient when waiting for approval.

New suburban push

Thanks to COVID-19, millions of people had to work from home. For many, working at home has become permanent, which necessitates the need for a dedicated home office or extra bedroom instead of the kitchen table. In addition, kids and parents being home full time since mid-March has highlighted the need for more space (both in the house and outside). Bonus rooms, basements, and garages have been converted into home offices, home gyms, or even school rooms. Small homes near large urban centers are not able to accommodate the necessities of COVID life, so many people have been moving to the suburbs or even farther out where the backyard is measured in acres.

Low supply+high demand=bidding wars

The National Association of Realtors (NAR) released a report showing that the number of houses receiving multiple offers is on the rise. As the country sat in quarantine in March, homes saw an average of 2.3 offers per listing. By the end of May, that number had increased to 2.7 offers per listing. The report goes on to project that job growth and recovery will lead to more home buying and further home price increases. According to Redfin homebuyer demand is up 25% over pre-pandemic levels. The advent of high-definition virtual tours has created a way to view a home without having to visit it.

HousingWire reported “42% of homebuyers who made a purchase during the January to May time period ended up in a bidding war, demonstrating the strong demand for homes amid low inventory.” It will be interesting to watch how the market behaves going into the fall and winter seasons when the market tends to cool down.

It’s clear that buyers are motivated to buy homes now. If you are a buyer and are anxious about a securing the winning bid in a comeptetive seller's market, take a look at our breakdown of how to get an offer accepted in a hot market.

Sellers who wanted to sell early this year should contact an expert real estate agent and get your home on the market. Home prices and equity are up (especially in Idaho), so it is easy to make money on the sale if there is a bidding war.

Posted by AndrewS at 8/7/2020 11:53:00 PM

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