A study of 14 million home sales over 2 decades reveals why winning a bidding war isn’t worth it

Winning isn’t everything.

A sweeping study examining nearly 14 million home sales across 30 states over the past two decades found that homebuyers who triumph in bidding wars — those who get that house they so badly want — often face a costly downside.

According to the research reported in Fortune, those who pay above asking price — a hallmark of competitive offers — tend to overpay by roughly 8% and later see diminished returns when they sell.

On average, these buyers’ annual returns were 1.3 percentage points lower than those who avoided bidding wars. 

Over a typical 6.3-year ownership span, that gap translated into a meaningful hit to appreciation — and an elevated likelihood of an even worse outcome. 

“Bidding-war winners were also 1.9 percentage points likelier to default,” the economist noted.

The trend also reveals a social divide. 

“Lower-income, black and hispanic buyers are more likely to overpay in bidding wars,” the research found.

The study further showed that regions prone to bidding wars — such as Rochester, New York, cited by the economist as their hometown — display the strongest evidence of the winner’s curse. 

Buyers in these areas were also quicker to resell, suggesting impulse-driven purchases rather than lasting satisfaction.

This dynamic could have broader economic consequences as the housing market cools. With foreclosures up 18% year-over-year, those who overpaid in the post-pandemic frenzy now face greater risk of financial loss. 

Because vulnerable buyers bear the brunt, the fallout could heighten housing insecurity.

Still, the findings suggest the pattern isn’t inevitable. 

The economist said the “winner’s curse may be preventable” through better education and transparency. 

Financial literacy initiatives and improved guidance for first-time homebuyers could help temper the emotional bidding that fuels overpayment.