In recent years, home prices have gone up, up, and up. In this "seller's market," home sellers can expect full–price and even over–asking–price offers, and often experience bidding wars among hopeful buyers to drive their sales price even higher.
That tide may be turning for some sellers.
Approximately 14% of nationwide listings reduced their asking price in June 2018 — up from a low of 11.7% at the end of 2016, according to Zillow. Price cuts are concentrated at the most expensive price–points in markets that have seen outsized price gains in recent years, notes Zillow senior economist Aaron Terrazas.
In fact, Zillow notes that growth in home prices is slowing in nearly half of the 35 largest U.S. metropolitan markets, with Sacramento and Seattle reporting the greatest slowdown since the beginning of the year.
All Real Estate Is Indeed Local
San Diego had the highest percentage of price cuts of any major metropolitan market, with 20 percent of its listings dropping their price in June 2018.
Rob de la Grange, a 39–year real–estate industry veteran in Scripps Ranch, says a confluence of high state and local taxes and rising utility costs (including water) are behind the market's "price adjustments."
"People are paying huge energy bills, about $450 a month for a 1,200–square foot house, and high water bills," says de la Grange. "It's pushing some people to sell and move out of the area."
Homeowners may try to sell quickly, but buyers are hesitating because of the high utility and water costs, preferring to rent or find newer properties with solar panels and drought–tolerant landscaping. But that's pricey too. The average rent for an apartment in San Diego is $2,044 per month.
The softening of San Diego's housing market may have caught some real–estate professionals and sellers by surprise, de la Grange suggests, so they may still be pricing homes unrealistically high. "If the house doesn't sell in 7 to 10 days, they'll have to adjust to compete with newer listings coming on the market," he says. "It's better just to price it right from the outset before you lose the buyer's attention."
Other fast–growing and high–priced markets are experiencing price reductions too. In Seattle, which continues to be the hottest market in the nation, 12 percent of all listings took a cut in June, the largest share in nearly four years. Portland, OR, Sacramento, CA, and Riverside, CA also saw an increase in the share of listings with a price cut compared to a year ago.
Ready, Set, Buy
The slowdown in higher asking prices could be encouraging to some buyers hoping to buy in areas they previously thought they couldn't afford. Among the largest housing markets, Indianapolis, IN, and Charlotte, NC, could see price growth slow the most over the next year, according to Zillow.
"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," says Terrazas.
While Terrazas admits it is too soon to call this a buyer's market nationally, "the frenetic pace of the housing market over the past few years is starting to return toward a more normal trend."
And that could open the door for many new homeowners across America.
Visit My Home® by Freddie Mac for more information on homebuying and helpful information to help you decide if now if the right time to buy.
Have a comment or question about this post? Email us to let us know what's on your mind.