Homebuyers have been waiting years for prices to go down—and finally, there are promising signs that it’s starting to happen.
Median home prices fell in July, dipping from $445,000 in June to $439,950 in July, according to a new monthly housing report by Realtor.com®.
In more good news for budget-minded buyers, the share of listings with price cuts reached a two-year high in July, increasing by 3.4% compared with the prior year to 18.9%—which is higher than before the COVID-19 pandemic.
July is typically a peak time for home sales, so price cuts are unusual—but this summer’s market has been different for two reasons.
“First, rates remain higher than expected, which means there is less buyer activity,” says Realtor.com senior economist Ralph McLaughlin. “Second, the prospect of lower mortgage rates coming this fall may have induced some buyers to wait. This combo has led sellers to lower their prices in order to attract more buyers.”
Where price cuts are on the rise
Of the 50 largest metros, a whopping 47 saw their share of price reductions increase compared with last July.
Metros that saw the largest increases in the share of price reductions included Tampa, FL, at 9.7%; Charlotte, NC, at 9.5%; and Phoenix, at 9.4%.
“These are places where sellers have had a good run over the past few years with rising prices, but with the effects of higher rates fully settling in, sellers are having to come back down to earth with their price expectations,” says McLaughlin.
(SeanPavonePhoto/iStock )
Some sellers are reluctant to lower prices
Buyers may benefit from slashed home prices, but cutting prices is understandably a hard pill to swallow for some sellers.
“Many sellers that I’ve seen have listed their homes because they’ve seen the prices that comps have fetched earlier in the year,” says Sam Fitz-Simon, a real estate agent with Compass in Danville, CA. “Telling them that they missed the mark and have to settle for less is never a fun conversation.”
Real estate professional and attorney Bruce Ailion, of Re/Max Town & Country in Atlanta, agrees.
“Even when presented with the most recent pricing statistics, many sellers were optimistic their home would sell for more than their neighbor’s home did last summer,” says Ailion. “The new reality begins to sink in only after a few showings and 20 days on the market with no offers.”
Sellers eventually face the music
In a sluggish market with rising inventory, some sellers are doing what they have to do.
“Sellers list to sell,” says Jennifer Vokolek of Re/Max DFW Associates in Dallas. “They don’t want to be in the house they are in anymore for one reason or another, so they are lowering their prices to accomplish their long-term goals.”
All four regions of the U.S. experienced price cuts, with the South seeing the biggest share of reductions, at 4.1%. It was followed by the West, at 3.4%; the Midwest, at 2.4%; and the Northeast, at 1.4%.
But even when sellers slash prices, they still might not get what they’re asking.
“Buyers are noticing more homes on the market that are no longer being snapped up within a day or two, so they offer less,” says Ailion. “Sellers with solid equity wanting to move forward with their life begin accepting offers at 3% to 5% below the reduced list price.”
Buyers wait it out
Even though sellers are cutting prices, buyers aren’t necessarily rushing to buy. The typical home spent 50 days on the market in July, five more days than the same time last year.
“The majority of buyers are still waiting for interest rates to come down,” says Fitz-Simon.
According to McLaughlin, the Federal Reserve is expected to cut rates as early as September. (While the Fed doesn’t set mortgage rates, the two numbers often move in the same direction.)
But mortgage rates aren’t the only reason buyers are holding off.
“Folks seem more focused on the outcome of the election than rates,” says Vokolek.
So buyers are biding their time, even as sellers cut prices and mortgage rates fell to their lowest levels since February.
Reduced residences
If you’re ready to save some cash on a home purchase, check out this trio of listings from the metros where the share of price reductions increased the most in the past year.
Tampa, FL
This spacious five-bedroom, three-bathroom house at 16358 Hyde Manor Drive was first listed for $664,000 on Feb. 15. The price has since been reduced seven times, including a trim of $33,000 on July 31.
The 2,624-square-foot home is now available for $545,000, which is $119,000 off the original asking price.
(Realtor.com)
Charlotte, NC
This charming three-bedroom, 2.5-bathroom home at 5301 Javitz Road was originally listed for $339,990 on July 23. After nine days on the market, the 1,460-square-foot home was reduced by $15,090, to $324,900.
(Realtor.com)
Phoenix, AZ
This incredible three-bedroom, two-bathroom home on 1335 W Monroe Street was listed on Jan. 26 for $520,000. The price of this 1,628-square-foot home has since been reduced four times.
Its latest reduction of $4,600 was made on July 16. The house is now listed for $495,000—$25,000 less than the original asking price.
(Realtor.com)
This beautifully remodeled three-bedroom, two-bathroom home on 1327 W. Oraibi Drive was listed for $419,000 on July 8. By July 19, the price was decreased by $19,100.
The 1,319-square-foot home is now listed for $399,900.
(Realtor.com)
