Bidding War Dichotomy: Some States Under the Weather, Others Heat up

The Redfin realty firm said that competition for houses as measured by bidding wars or multiple offers on properties was mixed across the country between November and December.  Unseasonably cold weather may have dampened competition in some markets, the company said.

Overall, Redfin said that offers facing other offers fell slightly in December to 52.0 percent from 52.8 percent in November and 62.4 percent in December 2012, but half of the 22 markets tracked by the company saw bidding wars rise while the other half saw them fall.  In addition to weather the dichotomy could be attributed to the holidays and to the limited availability of homes for sale in some areas.

Multiple snowstorms in Boston at least partially accounted for a drop of 19.7 percent in offers facing competitive bids and Baltimore also had a sizeable decrease, 13.5 percent. In San Jose competitive bids rose by 7.9 percent and both Chicago and Washington, DC had 3.7 percent increases.

Bidding wars often result in homes selling above the asking price and in San Jose 60 percent of homes sold above list with home-sellers averaging a bonus of 2.5 percent.  San Francisco came in second with 48.9 percent of sales exceeding the asking price.

In addition to strong dollar bids sellers continued to sweeten their offers with other competitive strategies.  The most common enhancement was the cover letter which accompanied 36.1 percent of Redfin's clients' winning bids (up from 35.9 percent in November.) Other strategies were all cash offers (7.8 percent), waiver of a mortgage contingency (9.3 percent), and waiver of the inspection contingency (8.4 percent).  It probably speaks to the level of competition in California's Bay area that 30 percent of the winning offers in San Jose and 20 percent in San Francisco waived financing contingencies and 50 percent of San Jose offers waived inspections.  Cover letters were included in at least 50 percent of the winning offers in both locations.

Redfin says that it expects competition to follow historical trends and rebound sharply in January "For the past three years, competition has surged during the first month of the year, rising 8 percentage points in 2013, 6.9 points in 2012, and 8.3 points in 2011," the company said.  The rebound, however, is likely to be muted by continued snowy weather in the Midwest and on the east coast which could lead many buyers to hold off on their shopping until the weather clears.