The American housing market has been on a rollercoaster ride since just before the COVID-19 pandemic. The market was healthy in 2019. The pandemic nearly halted sales, as unemployment rose and gross domestic product plunged. However, by the end of 2020, demand picked up. By 2021, the residential home market was on fire. That lasted until very recently, when a spike in mortgage interest rates pushed some buyers, and demand, out of the market.
The rise in home sales and prices has been linked to several factors. One is the health of the finances of middle-class and upper-class Americans. For the most part, their incomes were not undermined by the recession of early 2020.
Another cause was that Americans started to migrate from expensive cities on the coasts, like San Francisco and New York, to less expensive metros inland. Prices in large coastal cities remain as much as twice the national median home price of about $400,000. This price level is a record. It has reached this peak due to a sharp increase in sales. According to the S&P Case-Shiller housing index, home prices have increased by 20% most months this year, when compared to the same months in 2021.
Finally, the interest rates on a 30-year fixed mortgage dropped below 3%, which made housing more affordable. Those days are over, however, as rates have soared to near 6%.
One recent characteristic of the housing market is how quickly homes are sold. In the past, when a home hit the market, it was usually on sale for well over 50 days. In some markets, that has dropped below 30 days or lower. This caused a shortage of homes for sale in the hottest markets. Often, homes had several bidders, which in turn, pushed prices higher.
Online home company Redfin said of these so-called bidding wars, “Nationwide, 57.8% of home offers written by Redfin agents faced competition on a seasonally adjusted basis in May, the lowest level since February 2021.” At the high point during the pandemic, this figure was 68.8%.
The typical home received 5.3 bids, but the number varied sharply from market to market. In May, the metro with the most bidding wars was Worcester, Massachusetts, at 81.8%. The figures were posted by Redfin agents.
These are the 10 markets with the highest percentage of bidding wars in May:
| Metro | May 2022 | May 2021 |
|---|---|---|
| Worcester | 81.80% | 77.30% |
| Las Vegas | 74.50% | 65.40% |
| Boston | 72.60% | 76.40% |
| Dallas | 72.30% | 74.30% |
| Philadelphia | 69.30% | 70.90% |
| Indianapolis | 69.00% | 73.40% |
| San Diego | 68.00% | 77.50% |
| Detroit | 67.60% | 79.00% |
| Nashville | 67.20% | 73.30% |
| Baltimore | 67.00% | 77.10% |
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