Why fewer home bidding wars offers relief for house buyers

Bidding wars aren’t a big thing right now. In fact, it’s the opposite. Here's why that's a relief for home buyers.

Residz Team 3 min read

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To buyers, bidding wars are like an unpopular relative. They show up occasionally but they’re a real headache. Fortunately for them, but not so for home sellers, bidding wars aren’t a big thing right now. In fact, it’s the opposite.

National auction clearance rates are just over 60%, but very recently as few as half of Australia’s auctions weren’t being sold on the fall of the hammer (Adelaide has been the exception, with a recent clearance rate hovering around 74%). It spells reduced competition when buying a home, and that is a big relief for some.

The push-me-pull-you market

It is largely a buyers’ market, but for buyers it’s also a push-me-pull-you market. The RBA’s raising of the cash rate to 2.35% in September takes interest rates to a seven-year high, adding hundreds of dollars to mortgage payments and putting enormous pressure on home buyers’ budgets. But, it’s also turning the competition away.

Low competition for bids and offers

A recent Realtor.com survey in the U.S. showed fewer than one in 10 buyers (9.4%) were overbid in July. Tech real estate brokerage Redfin said in August that fewer than half their buyers (44.3%) had competition for their offers, down from 64% a year earlier, and the sixth straight monthly decline. It’s similar in parts of Australia.

Recently, one Wodonga home auction was cancelled due to lack of interest, and real estate agent Craig Huckel of Rise RE is quoted in the Border Mail as saying the auction market was not as vibrant as it was earlier in the year.

"We didn't end up auctioning it, changing it to private treaty - interest is drying up - it's getting a bit slow at the moment.," Mr Huckel said.
"So we're adjusting our marketing strategy to suit - if you don't get the interest it's no good flogging a dead horse.”

Remembering the good ol’ days for sellers

It’s a far cry from those tears-inducing FOMO (fear of missing out) days during the pandemic when bidding wars were common.

As Bloomberg in July 2021 described it at the time, the global property market went ‘bananas.’ Redfin found that 55% of its homes priced between approx. $290,000-$1.2 million AUD faced a bidding war in 2021, with the probability of a bidding war increasing as the listing price climbed.

For instance, homes in the approx. $1.2 million to $1.5 million AUD range experienced bidding wars 64.6% of the time, it said.

In Scotland 64% of for-sale properties had three or more buyers competing for them in first quarter 2021.

In Australia, a similar scramble for affordable regional and coastal lifestyle properties saw residential property prices rose nearly 24% in 2021.

Sellers under pressure to meet the market

But that added stress has eased for potential buyers like millennial Tassa who would be welcoming a cooling in the level of competition. It means home sellers may take longer to sell their homes, and feel more pressure to meet the market. Prices can only go one direction when nobody’s showing much interest. No wonder sellers are Googling ‘Should I sell my house now?’

More buyers dipping toes in the market?

But, the pendulum could swing back at any time. In the U.S. at least, even talk of a recession is sparking a small resurgence of interest from buyers. According to Dow Jones’s Mansion Global, more than a quarter of those surveyed by Realtor.com (27.1%) said that a recession will make them more likely to buy a home, with the changing economic landscape “providing potential buyers with new opportunities in the real estate market not seen for months.”

Residz can help buyers and sellers reduce the stress:

  • If you’re considering purchasing or renting a house, make sure you download our free property report for that address. We have 12 million addresses in our database, with every report offering information on internet speeds, crime trends, bushfire and flood risks, investability scores and a whole lot more.
  • Would you like to sell your home and connect with home buyers willing to pay your dream price? Residz has the solution, for zero dollars. Put a DreamPrice on your home to test interest. Read about DreamPrice(™) here.

Photo by 2 Bull Photography on Unsplash

References:

  • LIz Lucking, September 2022, Some House Hunters See Opportunity Amid the Economic Pressure, Survey Shows, Maison Global.
  • Realtor.com
  • Ronda Lee, 2022, Housing 2022: Here's the best way to win a bidding war — if you can afford it, Yahoo Finance.
  • Ted Howes, 2022, Award-winning East Albury home passed in at $950,000, Wodonga auction cancelled, Border Mail.