More and more home sellers are lowering their asking prices as rising interest rates increasingly diminish the number of buyers who can still afford to buy.
Sellers in Mid-Sized Pandemic Hotspots Seeing Highest Share of Price Cuts
As fast-rising mortgage rates cut homebuyers’ budgets and 80% of homebuyers think that now is a bad time to buy a house, sellers are cutting their listing prices.
The latest Redfin research indicates that approximately 50% of the metros in their most recent analysis of price cuts saw +25% of home sellers drop their asking prices in May. More than 10% of home sellers in all of the 108 metros analyzed in this research dropped their asking prices during May. Such action drove the national share of price drops to a record high.
Mid-sized metros in the West are taking the brunt of this growing share of price cuts. This makes complete sense since many of these metros had outsized price growth during the pandemic because they were the hottest spots for people to move to from other more expensive parts of the country.
Metros with Highest Shares of Price Cuts in May 2022
- Provo UT – 47.8%
- Tacoma WA – 47.7%
- Denver CO – 46.9%
- Salt Lake City UT – 45.8%
- Sacramento CA – 44.3%
- Boise ID – 44.2%
- Ogden UT – 42.6%
- Portland OR – 42%
- Indianapolis IN – 41.9%
- Philadelphia PA – 41.2%
Provo, Boise, Salt Lake City, and Ogden were also the top four metros where home prices increased the most during the pandemic. Prices in Provo skyrocketed +65.7% to $550,000 from May 2020 to May 2022. In Salt Lake City, home prices shot up +56.2% to $556,000; 66.7% in Boise to $550,000; and 57.2% to $500,000 in Ogden. These same four metros plus Sacramento also had the biggest increases in the share of listings with price drops from one year ago.
Price Cuts Symbolic of Slowing Housing Market
Price cuts are one result of potential buyers walking away from the housing market due to skyrocketing home prices, surging mortgage rates, high inflation and a volatile, sputtering stock market.
“There are two kinds of sellers in today’s market. those who already know the market has cooled, and those who are learning about the cooling market as they go through the selling process,” said Daryl Fairweather, Chief Economist for Redfin. “The former wants to sell quickly before the market slows further and they’re willing to price slightly below comparable homes in their neighborhood right away, and the latter may have to drop their price if their home doesn’t attract buyers within a few weeks. As more sellers come to terms with the slowing market (and price their homes appropriately from the get-go), fewer homes will have price drops.”
Only six of the 108 metros Redfin analyzed saw the share of homes with price drops decline in May from one year ago: McAllen TX, Elgin IL, Chicago IL, Fresno CA, Lake County IL and Springfield MA.
Thanks to Redfin.