The cost of buying a home is rising swiftly in three Midwestern towns, due to a housing shortage that is triggering bidding wars, according to a new report.
“I recently saw one house get 10 offers and sell for $50,000 over the asking price, and the buyer waived their appraisal contingency,” Detroit-based Redfin Premier real estate agent Desiree Bourgeois said in a statement. “Oftentimes, it’s move-in ready homes in desirable areas that draw competition.”
Nationally, the median home sale increased by 3.2 percent to $425,421 in February, which is the slowest growth in six months. That trend coincided with a slowdown in homebuyer demand.
U.S. pending home sales fell by 6.2 percent year over year, the biggest decline since September 2023, and fell by 1.1 percent month over month on a seasonally adjusted basis.
Although homebuying demand is falling, prices are rising because there aren’t enough homes for sale in much of the country.
In Northern California, where there is a housing shortage, multiple bids are the rule rather than the exception.
Redfin found that in San Jose, California, 67.6 percent of homes sold above their final list price, the highest share among the metros the company analyzed. Oakland followed at 59.6 percent and San Francisco at 58.4 percent.
The median home sale price in the area increased by 11.1 percent in February.
Sellers often use underpricing as a strategy to jump-start bidding wars in hot markets with low inventory and high buyer interest.
“Sellers sometimes do this on purpose, fully aware that lower starting price would create a flurry of activity,” Andreis Bergeron, vice president of sales at Awning.com, told The Epoch Times.
“Property is intentionally listed below market value to generate initial offers, trigger a series of counteroffers, and then culminate in a sale price 10 or 20 or 30 percent above what the property was listed at,” he said.
“In such highly competitive markets, listing the property slightly under the market value, especially with limited inventory, can cause bidding wars resulting in better results for the sellers,” Dwell One Realty owner Tim Stassi told The Epoch Times.
Several factors lead to homes being listed below their final selling price, such as agents using outdated data.
“Listing agents sometimes deliberately price homes 5 to 10 percent below market value to generate multiple offers and drive up the final sale price. However, in more balanced markets, this tactic carries a risk—if demand isn’t strong enough, the home may not get the desired competitive bids and could sell for less than it’s worth,” Stassi said.
The impact can be devastating due to the ongoing lack of available inventory, which pushes buyers into competitive offers and drives prices higher and higher until they scare off the majority of potential homeowners and investors.
RedFin found that in Detroit, active listings dropped 6.7 percent year over year in February, the largest decline among the top 50 metros. Newark in New Jersey (minus 6.4 percent), Milwaukee (minus 3.7 percent), Cleveland (minus 3.6 percent), and Portland (minus 3.1 percent) followed.
“The long-term impact of underpricing isn’t good because as the actual cost of the home increases, wages don’t follow,” FireCashBuyer.com CEO Joel Efosa told The Epoch Times.
“Let’s not forget all the ghost costs of home ownership, such as insurance and tax. This is what you call a bubble waiting to burst.”
Bergeron called for policy changes to expedite construction development approvals to ensure more housing inventory is available, “especially in these hot cities where demand has driven up prices.”
Although prices are rising in the Midwest, the region remains the most affordable in the country.
For example, Detroit has the lowest median sale price of any major metro, at $180,000. That’s compared to Cleveland, at $217,750, which is the second most affordable home-buying region.
Housing prices fell in Southern states, such as Texas, Georgia, and Florida.
In Austin, Texas, for example, Redfin determined that the median home sale price dropped 2.7 percent year over year to $430,000, followed by Tampa, Florida, with a drop of 1.9 percent, San Antonio, Texas, at 1.7 percent, Houston at 1.5 percent, Atlanta, Georgia, at 1 percent, and Jacksonville, Florida, at 0.8 percent.
“There are about five times more home sellers than buyers, meaning it’s a buyer’s market,” Texas-based Redfin Premier agent Connie Durnal said. “That’s why I’m telling all of my sellers that it’s crucial to price their homes competitively.”
“Today’s housing market is weird,” Bourgeois said. “Some homes are attracting bidding wars like it’s 2020 again, while others are sitting on the market for weeks with no action.”
