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These are the most competitive housing markets in the US: LendingTree

·3 min read

With fewer available homes on the market, bidding wars are heating up.

Two California cities top LendingTree's list of 50 most competitive U.S. cities to buy a home — San Jose, followed by its neighbor to the north, San Francisco. The online lending marketplace ranked the 50 most competitive metro areas in the U.S. based on a buyer’s credit score, down payment amount and how much a buyer shopped around for a mortgage.

“It has a lot to do with the amount of supply in the city,” LendingTree’s Chief Economist Tendayi Kapfidze told Yahoo Finance Live. “We know that in San Jose, it’s a very wealthy area so there’s a lot of competition amongst homebuyers because a lot of people have wealth and can afford homes.”

In San Jose, where the average sale price of a home is $1.2 million, buyers had some of the best credit scores in the country. According to LendingTree, 84.15% of buyers in the “Capital of Silicon Valley” had a credit score of 720 or higher. A credit score of 720-850 is considered excellent and usually guarantees buyers get the best rates on credit cards, car loans and home mortgages.

The average down payment in San Jose was 23.67% of sale price, a national high. “In a lot of cities across the country, that number is less than 20%” said Kapfidze. In San Francisco, where the average sale price is $1.4 million, 81.96% of buyers had a credit score of 720 or higher and the average down payment was 21.43%.

Up-and-coming Raleigh, North Carolina, was the third most competitive metro area for homebuyers. With the average home sale price of $340,000, LendingTree found that 70.48% of buyers in Raleigh had a credit score of 720 or higher and the average down payment was 21.15%.

New colorful homes near downtown in Raleigh NC
New colorful homes near downtown in Raleigh NC

"I would probably say the biggest surprise for me was Raleigh at number three,” said Kapfidze. “Typically, where we find the most competitive cities tend to be areas with higher home prices and less affordability, but Raleigh is a very affordable midsize area.”

Other cities that made LendingTree's list of most competitive cities for homebuyers were Portland, Ore., San Diego, Los Angeles, Boston, Kansas City, New York, Minneapolis, and Milwaukee.

Credit: LendingTree
Credit: LendingTree

The least competitive homebuyers in the country can be found in Virginia Beach, followed by Riverside, Calif., and Atlanta.

LendingTree reviewed more than 750,000 mortgage loan requests that came through its marketplace from March 1 through March 24.

Credit: LendingTree
Credit: LendingTree

Mortgage shopping

When it comes to improving your odds in a bidding war, Kapfidze said getting pre-approved for a mortgage is “essential.”

“When a seller is looking at competing bids, what they’re trying to assess other than who is giving the best offering price, is what are the odds someone can get from contract to signing to closing,” he said. “Having a pre-approval is one of the main things a seller would look at to make sure someone is coming in with a real capability to complete the transaction.”

San Jose may be tops when it comes to credit scores and down payments, but LendingTree’s analysis found its homebuyers rank No. 17 when it comes to shopping around for the best deal on a mortgage.

“People don’t shop around as much as would be optimal," said Kapfidze, who recommends comparing financing deals at three to five lenders before settling on a mortgage rate.

“People will go to all kinds of lengths comparing gas prices, comparing the price of coffee in their neighborhood, but really for the biggest transaction that they engage in, surprisingly, a lot of people still don’t shop around which is kind of mind-boggling for me because the savings can be so substantial," Kapfidze said.

Alexis Christoforous is an anchor at Yahoo Finance. Follow her on Twitter @AlexisTVNews.