With the onset of the spring market, the expectation of rising mortgage rates, and fewer active listings compared to one year ago, buyer competition intensified in February, according to the February 2022 REALTORS® Confidence Index Survey report, a monthly survey of REALTORS® about their residential transactions.
On average, there were nearly five offers for every home sold, a higher rate compared the prior month and one year ago (3.9 in the prior month, 4.1 one year ago). Respondents reported more than five offers on average in Massachusetts, Georgia, Texas, Colorado, Utah, Washington, and California.
48% of buyers offered above the list price, typically at $10,000
Forty-eight percent of buyers' offers were above the list price (46% in the prior month), with 13% of offers at 10% above the list price (12.2% in the prior month). On average, offer list price was 2.9% over the list price (2.3% in the prior month).
Based on the median sales price of $357,300 in February (that would incorporate the 2.9% premium), a buyer typically offered $10,000 more than the asking price.
Typical buyer loses 2 home offers before succeeding 3rd try
According to REALTORS® who reported on the number of offers the buyer previously made (and lost), buyers typically made two offers before a successful third offer. However, 25% of buyers are successful in closing on a home on the first try. Working with a REALTOR® who knows local market conditions can help home buyers to make a good offer.
84% of listings get sold in one month
Eighty-four percent of listings were on the market for less than one month (79% in the prior month, 74% one year ago). Competition has become more intense since the housing market's recovery in 2012. In January 2012, only 21% of listings were on the market for less than one month while 28% of properties were on the market for at least six months. That situation has significantly reversed over time, with only two percent of properties on the market for at least six months.
With homebuying demand still outpacing supply, properties typically stayed on the market for a shorter time compared to one year ago, at 18 days (19 days in the prior month, 20 days one year ago).
Competition to intensify in 2022 before waning
Competition could intensify in 2022 before waning in 2023 as home buyers compete to lock in at the current rates. Mortgage rates may rise more steeply in 2023. The federal funds rate is likely to hit 2.8% in 2023 and hold at that level in 2024, according to the Federal Open Market Committee (FOMC) March 16, 2022 forecast.3 Since 2000, the spread between the federal funds rate and the 30-year fixed mortgage rate has averaged 3.3%, so mortgage rates could hit 6% in 2023 if the FOMC sticks to the course of planned increases as of the March 2022 meeting. Risks to global economic growth and the U.S. economy could delay the planned increase.
As competition intensifies, first-time buyers with incomes of about $70,000 - $80,000 will not be able to afford a home. Among 25-to-44-year-old renter households, 1.4 million will not be able to afford a home if mortgage rates rise from 3.6% to 4.5%.
However, household earning above $80,467 will be able to afford a home and some of these renter households who may have earlier planned on buying a home later may decide to buy sooner in 2022 to beat the rising mortgage rates.
Gay Cororaton is a Senior Economist and the Director of Housing & Commercial Research with the Research Group of the National Association of REALTORS®. She manages the production of NAR’s proprietary housing, commercial, and international statistics, surveys, and research. Her research focuses on the effect of economic, demographic, and industry conditions on the current trends and outlook in the residential and commercial property markets.
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