More properties having price cut prior to sale
The typical price for a home in the United States has been increasing steadily in recent years, driven in part by rapid appreciation in several popular markets. However, a new analysis by the real estate site Zillow finds that price cuts are also becoming more common in newly sold homes, especially among high-end residences.
The analysis found that two-thirds of the markets included in the report had a higher share of residences sold with a price cut in June when compared to the same month in the previous year. Price cuts were becoming much more prevalent in the hot markets along the West Coast, although the median amount of the price reduction in the U.S. remained steady when compared to previous years.
A total of 14.2 percent of the listings included in the analysis for June sold with a price reduction, up from 13 percent in January and 13.4 percent in June 2017. The median U.S. home had a year-over-year growth in value of 7.7 percent in January, while the median home sold in June had a price cut of 2.9 percent.
Zillow said the most recent low point of listings sold with a reduced price occurred at the end of 2016, when 11.7 percent of sold residences had a price cut. The increase in the share of homes sold with a price cut between January and June was the most substantial for this period on record, and more than double the increase that occurred in the same period in 2017.
"The housing market has tilted sharply in favor of sellers over the past two years, but there are very early preliminary signs that the winds may be starting to shift ever so slightly," said Aaron Terrazas, senior economist at Zillow. "A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price points and primarily in markets that have seen outsized price gains in recent years. It's far too soon to call this a buyer's market, home values are still expected to appreciate at double their historic rate over the next 12 months, but the frenetic pace of the housing market over the past few years is starting to return toward a more neutral trend."
California markets had the most noticeable upswing in price reductions. One in five listings sold in June in San Diego had a price cut, up from 12.3 percent at the start of the year and 12 percent in June 2017. The share of listings sold with a price cut stood at 16.7 percent in Sacramento, 16.4 percent in Riverside, 14.1 percent in Los Angeles, and 9.5 percent in San Jose. The San Francisco market was steadier, with 7.7 percent of June listings selling with a price reduction – up from 6.5 percent in January and 7.6 percent in June 2017.
Other West Coast markets also saw a substantial increase in price cuts. In Seattle, the share of homes sold with a reduced price rose from 6.9 percent in both June 2017 and January to 12 percent in June. A total of 17.4 percent of homes sold in Portland, Ore. had a price cut, up from 12.8 percent at the start of the year and 12.7 percent in the previous year.
Price cuts were most common in Tampa, Fla., where 22.2 percent of homes sold in June had a price reduction. However, the share of homes sold with a price cut showed minimal change from the start of the year or the previous year. A total of 18.6 percent of homes in this market sold at a discount in January, along with 20.2 percent of listings sold in June 2017.
Although the share of higher priced listings with a price cut grew by 0.9 percentage points from the start of the year to 16.2 percent, price reductions were slightly less common. A total of 11.2 percent of lower priced homes sold with a price cut, down 0.1 percentage points from January.
Home prices have long proved a challenge to potential buyers. The National Association of Realtors has frequently warned that a limited supply of homes for sale has helped ramp up prices on the available inventory. In competitive markets, a listing can easily receive multiple offers, with bidding wars sometimes elevating the sale price above the initial asking price.
However, Zillow said price growth is starting to slow down in markets which have seen fast-paced growth in recent years. In Seattle, the median home value in June was up 11.4 percent when compared to the same month in the previous year – down from a year-over-year growth of 14 percent in January.
Of the 35 major metropolitan areas included in the analysis, the share of residences sold with a price cut was unchanged or down from the start of the year in seven markets. Twelve markets had a year-over-year reduction in the share of homes sold with a price cut.
In San Antonio, which has a median home value of $185,000, 17.8 percent of June's listings had a price cut – down from 20.2 percent in June 2017 and 18.4 percent in January. The share of homes sold with a reduced price in Phoenix also fell to 17.8 percent, down 2.1 percentage points from the previous year but up 0.5 percentage points from January.
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