Home sellers are lowering prices as the housing sector cools, according to research by a real estate data company.
More than 25% of homes in the market right now have dropped in price, Altos Research found, which contrasts sharply with how prices have risen over the past two years.
“Rising rates and changing economies have slowed super-anxious buyers,” Mike Simonsen, co-founder and CEO of Altos Research, a real estate analytics firm, told MarketWatch. “And what we’re hearing is the speed of change.”
Said without wheels: “We are moving from a real shopping frenzy to much more normal conditions,” he added.
The boom in the U.S. real estate market in the midst of the pandemic was felt across the country. In a high-demand area like San Jose, California, the typical home was valued at $ 1.5 million as of May 31, according to Zillow. This is an increase of 23.7% over the previous year. As of May 2020, the typical Bay Area home was valued at $ 1.09 million.
Under normal circumstances, about a third of homes listed on the market for sale receive a price reduction before being sold, Simonsen explained, and when the market is hot, that drops to 25%. This spring, however, only 14% of homes in the market have suffered a drop in prices. And this is a reflection of the high demand and low inventory.
“Sellers over the last two years may be overvaluing their home and are still getting offers; this frenzy is gone, so it’s a much more normal market,” Simonsen said.
With buyers slowly declining, this percentage is rising, a trend also supported by research by Redfin, a real estate broker. About 21 percent of sellers lowered their list price during the four weeks ending June 5, which was the second highest share recorded since 2015, Redin said.
Sellers will have to lower the sale price by the end of the summer. “In July, expect to return to our normal conditions nationwide,” Simonsen added. “We’ve been hotter than normal for more than two full years since the pandemic started. In August, unprepared vendors will be surprised.”
Good news for first time home buyers
The average selling price of a home sold in the US was still at an all-time high of $ 428,700 in the first quarter of 2022, up from $ 313,000 in the first quarter of 2019 before the COVID-19 pandemic, according to data from St. Louis. Fed. Simonsen said the magnitude of the price cuts could vary, starting at $ 5,000, depending on the value of the home.
For first-time home buyers, who have seen prices gradually rise out of reach over the past two years, there could be some relief. “If people want to buy a house, they could exceed the offer for someone with cash or an investor,” Simonsen said. “But now the selection is on the rise, the competition is declining and they finally have some opportunities to buy.”
But don’t expect prices to hit rock bottom. “There’s still nothing in the data that shows an indication of falling house prices,” Simonsen said. But “there is an indication of a likely zero house price appreciation in 2023.”
Do you have thoughts about the housing market? Write to MarketWatch Journalist Aarthi Swaminathan at firstname.lastname@example.org.