Competition has been fierce for homebuyers these past two years. When a new home hits the market, there seems to be a frenzy of interested buyers all racing to snatch it up before anyone else can, and all looking to outbid their opponents. The competition created by a huge imbalance between supply and demand is what is behind the soaring home prices, as buyers have been willing to pay well over ask in order to secure properties. It has also created what sellers love most: bidding wars. A bidding war is when there are multiple offers on a home, so the buyers take turns offering more money or better terms in order to win the house. Much like an auction, the highest bidder wins. This is great for the seller, less so for the buyer, who often spends more than they had planned.
A recent Redfin report is showing indications that bidding wars across the nation are slowing down, a clear sign that the out of control market may be shifting a bit. The report shows that the month of March 2022 was the first in six months that showed a decline in the number of bidding wars seen nationally. February 2022 saw 66.7% of buyers facing competition resulting in bidding wars, while March saw 65%. Though the decline was minimal, it still represents the potential beginning of a shift to less buyer competition, which will inevitably and eventually slow rising home costs.
A decline in buyer competition could be a result of several factors designed to slow the market. The rising mortgage interest rate is certainly a turn off for buyers. The mortgage interest rate is currently sitting at its highest level since 2010, and home prices are up on average nearly 20% from this time just last year. These two factors have pushed the average monthly payment for a homebuyer up by nearly 30%! As these costs increase and more buyers are priced out, it is expected that buyer competition will continue to cool through the year.
These numbers represent the national real estate market. Unfortunately, the South Florida real estate market may not be so lucky. Of the top five metropolitan areas that saw the biggest decreases in buyer competition, only one was in the state of Florida and it was not in South Florida. Orlando came in at #5. Here in the Florida Keys, competition and low inventory continue to drive our market. The demand for luxury homes for sale in the Florida Keys continues to be strong, with higher and higher priced listings going under contract, including the most expensive property in the Keys, which was listed for an amazing $95 million. Rising mortgage rates tend to have less impact in luxury markets like ours, and it remains to be seen when the market will relax for buyers in the Keys.