The professionals say that buyers in some markets are already – or may soon get – some relief in the form of lower housing prices. Already, in the past four to eight weeks, experts have noticed downward price pressure in the previously strong, higher-priced markets. (Check out the lowest mortgage rates you can get right now here.) “These were markets where the average sell-to-list ratio was well over 5% above list price, examples include San Francisco, San Jose, Austin, Denver, and Seattle,” says Chris Stroud, co-founder and head of research at HouseCanary, It is a national technology-driven brokerage that provides analytics for residential real estate.
All of the above cities experienced a very rapid drop in their average closing prices during July and August as buyers no longer have to get into bidding wars or bid above requests to be competitive. “Mean closing prices have largely stabilized in these markets for the most part over the past few weeks now that out-of-system excesses have been cleared up,” Stroud says.
The markets with the highest share of price cuts in July data from Realtor.com cluster mostly in the Sun Belt and include Las Vegas, Phoenix, Austin, Sacramento, Denver, Portland, Dallas-Fort Worth, Nashville, Tampa and San Diego.
Where will we see future home price cuts?
Those same markets could see further declines, says George Ratio, chief economist at Realtor.com. “As we look towards the next few months of rebalancing, we can expect these markets to feel increased pressure on list prices, as seasonal trends take deeper roots and waves of buyer traffic from the summer peak.”
For their part, a team of strategists at Goldman Sachs said that metro areas in the West are likely to see a price correction, and this is “particularly true in markets with lower levels of housing affordability, such as Seattle, San Diego and Los Angeles.”
In the long run, lower prices will depend, in part, on where inventory is increasing rapidly and excessively in conjunction with pent-up demand due to interest rates, experts say. “As we enter the period of price increases, the majority of markets have been experiencing record low inventories. This environment, Stroud explains, has so far prevented significant price drops in many areas across the country.
Markets that have seen a particularly large influx of outsiders — places like Boise, Denver and Salt Lake City — may be more vulnerable to lower prices as the shift to remote work largely completes, says Kate Wood, home expert at NerdWallet. “It’s a double whammy for home sellers as the influx of the wealthy with nothing dries up and many locals are now being priced in. With home prices still rising, these markets are still far from being buyer-friendly, but sellers may not expect the bidding wars and zero-emergency bids that It has spread over the past two years,” says Wood.
As housing markets decline in the wake of rising mortgage rates, prices and inflation, some of these markets are finding that they have an increasing amount of leftover inventory and not enough buyers, Ratio says. “For homeowners who are motivated to sell, the answer is increasingly an old-fashioned one — price cuts. Even as median list prices continue to rise — the result of homeowners pricing properties based on months of market data — inventory is starting to build and buyer traffic is shrinking in Put pressure on prices,” says Ratio.
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