Buyers in some markets are already getting, or will soon get, some relief in the form of lower home prices, professionals say. Already, in the last 4-8 weeks, pundits have noted downward price pressure in previously strong higher priced markets. (See the lowest mortgage rates you can get right now here.) “These were markets where the median sales price to list price ratio was well in excess of 5% above list price, and examples include San Francisco, San Jose, Austin, Denver and Seattle says Chris Stroud, co-founder and head of research at HouseCanary, a tech-driven national brokerage that provides residential real estate analytics.
All of the cities listed above saw a fairly rapid decline in their respective median closing prices during July and August as buyers no longer had to engage in bidding wars or bid above those requested to be competitive. “Average closing prices have largely stabilized in these markets for the most part over the past few weeks now that excesses have been removed from the system,” says Stroud.
The markets with the highest proportion of price cuts in Realtor.com’s July data are clustered primarily in the Sun Belt and include Las Vegas, Phoenix, Austin, Sacramento, Denver, Portland, Dallas-Fort Worth, Nashville, Tampa and San Diego.
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Where will we see house price cuts in the future?
Those same ones may see more declines, says Realtor.com senior markets economist George Ratiu. “As we look ahead to the rebalancing months ahead, we can expect these markets to feel increasing pressure on list prices, as seasonal trends take deeper hold and buyer traffic picks up from the peak of summer. “.
For its part, a team of strategists at Goldman Sachs said that western metropolitan areas are more likely to see a price correction, and that is “especially true for markets with low levels of housing affordability, such as Seattle, San Diego and Los Angeles. ”
Longer term, price declines will depend, in part, on where inventory rises rapidly and excessively along with suppressed demand due to interest rates, experts say. “Going into the rate increase period, most markets were experiencing record low inventory. This environment has so far prevented large price drops in many areas of the country,” explains Stroud, who points out that this may change.
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Markets that have seen an especially large influx of outsiders — places like Boise, Denver and Salt Lake City — may be more vulnerable to price drops as the shift to remote work is nearly complete, says Kate Wood, a home expert at NerdWallet. “It’s a double whammy for home sellers as the influx of deep-pocketed outsiders dries up and many local residents are now out of price. With home prices remaining high, these markets are still far from buyer-friendly, but sellers probably shouldn’t expect the bidding wars and zero-contingency deals that have proliferated in the past two years,” he says. Wood.
As housing pulls back in the wake of higher mortgage rates, prices and inflation, some of these markets are finding they have a growing volume of lingering inventory and not enough buyers, Ratiu says. “For owners who are motivated to sell, the answer is increasingly old-fashioned: price cuts. Even though median list prices continue to rise, as a result of homeowners pricing properties based on market data from months ago, increased inventory and reduced buyer traffic are starting to have an effect. downward pressure on prices”, says Ratiu.
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