A growing number of homebuyers are worried about competition, according to a Redfin survey of 975 homebuyers conducted this month.
While affordability is the main concern keeping homebuyers up at night, nearly 19 percent cited competition from other buyers as their top worry, up from 16 percent in February and 11 percent in November.
Interestingly, fewer buyers were concerned about home supply this quarter than last, even though the dwindling number of homes for sale is the main driver of competition and affordability woes.
Buyers’ concerns are justified. Sixty percent of Redfin offers have faced competition in May to date and over half of all offers faced competition for much of each of the last four years. With prices up nearly 5 percent, the thought of a bidding war would be particularly worrying for a cost-conscious buyer.
“Though enticed by high rents and low mortgage rates to begin a home search, first-time buyers face a number of obstacles in today’s competitive market,” said Redfin chief economist Nela Richardson. “In many cities, starter homes have seen the largest price increases because the supply of affordable homes on the market is so low and the demand for these homes is so high.”
Those looking to buy are often fleeing an expensive rental market. Consistent with February’s survey, about one in four homebuyers surveyed this month cited high rent as their reason for house hunting, a significant jump since last August.
The change is attributable to first-time buyers. In the most recent survey, over fifty percent said high rent led them to the market, as compared to only 25 percent of first-timers in August.
“Landlords are well aware of rental demand, particularly in popular neighborhoods. I’ve seen 3 to 5 percent rental price increases this year in Chicago. Clients tell me the higher the rent becomes, the less desireable their apartment becomes,” said Redfin agent Marcus Rolle.
The only reason given more frequently was a major life event, such as the birth of a child or a marriage. No other option accounted for even 10 percent of the responses.
Eighteen percent of homebuyers said that the recent turmoil in the stock market was a worrying economic sign that might signal a housing downturn, down 5 percentage points from February. Only 7 percent said stock market losses cost them money they had planned to use to buy a house, down from 12 percent. Seventy-two percent said the stock market had no effect on their decision to buy.
Buyers were asked to cite up to three of the most important factors in their choice of home, beyond square footage and price. Three choices rose to the top: the layout, finishes and design were most important (46%), followed by school quality (41%) and a yard or green space (39%). Ease of commute came in fourth, checked off by 32 percent of respondents.
Of buyers surveyed, 34 percent said they are more inclined to buy now than they were a year ago, up one percentage point from the previous survey and up five percentage points from the August report.
Only 27 percent of buyers felt an increased urgency to buy before prices or mortgage rates rose, down four percentage points compared to last quarter.
Redfin’s survey was conducted between May 17 and May 23, and includes responses from 975 homebuyers in 36 states and Washington, D.C.
