U.S. home prices remain higher than ever, but a growing number of sellers in some regional markets “finally feel compelled to cut prices,” according to a report released Thursday by Realtor.com.
Even though 50 of the nation’s largest metropolitan areas saw sharp increases in median list prices last month — with asking prices 13% higher than last year — some areas saw steeper price drops. Nationally, homes with price cuts jumped to 10.5% in May from 6.2% last year.
These cities saw the most price reductions, according to Realtor.com:
- Austin, Texas was the city with the most price cuts, with price cut cases up 14.7%.
- Las Vegas, Nevada, with price drops of 12.3%.
- Phoenix, Arizona, with price drops of 11.6%.
“This slowdown seen in these hot markets could mean that sellers’ expectations have yet to catch up with the realities of this rapidly changing buyer-seller dynamic,” Realtor.com’s post said.
As high mortgage rates begin to cool the market, inventories begin to rise. While most U.S. housing markets “remain in seller’s market territory,” Danielle Hale, chief economist at Realtor.com, said “the market is a little more buyer-friendly than we are today.” we saw last month, and we expect that to continue.”
Why are more sellers lowering their prices? According to a study by Florida Atlantic University and Florida International University, these three cities in Texas, Nevada and Arizona ranked among the top 10 areas with the most “overpriced” housing prices.
This may be because some regional markets are more at risk of falling prices than others, according to recent analysis by Fortune, which used data from real estate research firm CoreLogic. The five Utah housing markets included in the Fortune/CoreLogic analysis are rated as having a “very low” risk of falling house prices: Logan, Ogden-Clearfield, Salt Lake City, Provo-Orem and St. George at the southern end of the state.
The big picture: As the Federal Reserve’s high interest rates increasingly pinch potential buyers, the nationwide housing stock begins to rise. The number of new listings hitting the market in May increased for the first time since June 2019, according to Realtor.com. This means that last month homebuyers had 8% more active listings to browse than in the spring market of last year.
That could mean May “could become a turning point in the hot real estate market that has been scalding homebuyers for the past few years,” Realtor.com reported.
- “We’re seeing more owners deciding to sell,” Hale said. “Buyers can expect more inventory in the future, more homes to choose from.”
While this is good news for homebuyers, it doesn’t mean the market will no longer be competitive. The U.S. real estate market still has a long way to go from the frenzy triggered by the COVID-19 pandemic over the past two years. There are still only half the number of homes on the market compared to pre-pandemic levels, Realtor.com reported.
- “Nevertheless, this recent uptick could offer a glimmer of hope to buyers who have been scrambling for homes amid bidding wars and over-demanded offers,” the report said.
An increase in inventory “should eventually result in a slower pace of sales” and slower price increases, Hale said. “With prices continuing to grow in double digits, we are a long way from a price drop, but prices growth is likely to slow down.
What are the current prices: In May, the nation’s median asking price for a home hit a new high of $447,000 — a 17.6% year-over-year increase and 35% increase from May 2020, according to Realtor .com.
- Combine these price gains with high mortgage rates, which are now above 5%, and the cost of financing a home is now up 50% compared to the same period last year.