Market Update: Prepare for War

By |2015-05-05T09:00:25+00:00May 5th, 2015|

For those that are looking to buy a home, it’s time to get ready to fight for the property you want. Why? Because bidding wars are back and they’re back with a vengeance. According to the National Association for REALTORS©, home prices are up but supply is down. NAR reports that 86% of cities are experiencing rising prices with fewer available homes to choose from. If you’re a seller, this is great news! If you’re a buyer though, this presents an interesting challenge with the potential to see a home in your budget all of sudden get inundated with buyers and outrun that budget you had set.

One reason for the higher prices is that people have been selling houses in a more auction-like way. “If a list price once meant the seller’s ceiling, for many homes it’s now the buyer’s floor –- the number with which the auction can begin” (Wonkblog). Rather than setting prices high, some agents and homeowners are going the other way– listing properties for less to create bidding wars. The goal is to attract as many interested buyers to a property as possible and set buyers into a frenzy. Add to the frenzy the irrational emotions of bidding and you get people that are no longer bidding to buy the property for the market value, they are bidding to win. If you want to buy a house for value, you are negotiating. If you are bidding to win, you will do whatever it takes. Studies even show that people are willing to pay more at an auction than if the item was a one-click purchase (Wonkblog).

Whether or not that auction-like tactic is actually making sellers more money or not is hard to say, but for buyers it is now creating even more obscurity in the market. A buyer may think a $300,000 home is in their budget, only to find that the sellers never intended to accept that price anyway. Not knowing whether a home is intentionally under-listed or accurately priced and within your budget is now a growing battle for buyer and broker alike to try and gauge.

So as a buyer, what do you do? Put on the boxing mitts and prepare for battle!

Sellers Take Note

On the flip side, this means that the market needs more sellers! As more jobs are created, income goes up, and so does the demand for housing. The result is higher prices and buyers out bidding each other to make the winning offer. For the homeowners who have been slow to think of selling, now is a great time to reconsider!

Before jumping the gun and throwing a for sale sign in your yard though, you should note one thing: exactly what kind of houses are increasing in price and benefiting from these bidding wars. According to U.S. Census, the biggest increase in sales, of 17.3%, was for properties costing $500,000 and up, while sales of properties $199,000 and lower has actually decreased 11.4% (Bloomberg). This suggests that individuals and families in the higher income brackets are doing better and are leading the charge searching for and bidding for high priced houses. For many buyers, there are still fairly tough credit standards standing in the way of giving it their all in a bidding war for their dream home, but those in the higher income brackets typically rely on less financing and more cash which gives them the flexibility to aggressively pursue their property of interest.

Until access to credit eases up or the inventory for homes increase, buyers will probably still be running the show for the time being though. At least now you know that bidding wars are back. Whether that’s good or bad news, that’s up to you to decide.


Until next time…keep it real!

About the Author:

I was fortunate enough to flip my first house the Summer before Senior year in high school and ever since real estate and entrepreneurship have been my passions. I get to live out both of those passions every day by helping real estate professionals from around the world market, advertise, lease, and sell their properties and spaces in new, innovative ways using video.

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  1. […] we discussed last week, bidding wars are back. With very tight housing supply, the likelihood of these bidding wars disappearing anytime soon is […]

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