It's no secret that buyer demand has been extremely high ever since the Federal Reserve substantially reduced interest rates during the pandemic. In fact, the median value of a home grew by more than 17% in 2021, which was the result of exceedingly high demand and a relatively low housing supply.
When the market conditions heavily favor the seller, it's common for intense bidding wars to take place and home prices to be driven up as a result. While buyer competition is still high, there are signs that competition is easing.
According to a recent report by the National Association of Realtors, the average number of offers made on sold homes has dropped by a considerable amount over the last few months.
The average number of offers per home reached a high of 5.5 in April 2022. Since then, the numbers have dropped steadily with each passing month. In May the average was around 4.0 offers, in June it fell to 3.3, and by July the average was just 2.5 offers per home. This number may drop even further in the months to come.
Higher Interest Rates
This decrease in offers can be attributed to two things. Number one, higher interest rates. Multiple Fed rate hikes this year have made it more expensive to buy a home and have caused some buyers to leave the market temporarily. Number two, a slightly higher inventory of homes on the market. Buyers have more options to choose from and may not be scrambling to put offers in. With lower buyer demand and more homes on the market, competition is effectively reduced. Also buyers are looking at adjustable interest rates or may a 2-l buy down on the interest rates to keep their payments affordable as they adjust into their new home over several years.
What These Trends Mean for You
Even though there were a high number of buyers that were searching for homes in 2021, many potential buyers decided to stay out of the market because of the intense competition. Even if you were willing to offer more than asking price, there was a good chance that you would have been outbid throughout most of 2021.
What the last few months indicate is that buyer competition is easing, which significantly reduces the possibility that you'll need to manage a bidding war. Even though the market is still tilted towards sellers, a greater number of homes on the market means that potential buyers may be able to make an offer and purchase a home without too much hassle.
If you avoided buying a home over the past couple of years because of the high competition, now might be a great time to start searching for a new home. Even though buyer demand is still relatively high, it has dropped considerably over the past few months. If you're in the market for a new home, you should have less competition when making an offer.