There were significantly more homes that experienced a price cut in August, according to new data released by Trulia.
According to a report by the real estate listing site, 17.2 percent of US listings had a price reduction, an increase from 16.7 percent in August 2017. This marks the highest level of price cuts since 2014.
The Good News – More Homes Are Getting Price Cuts
Trulia’s report revealed that in the first half of 2018 the share of listings with a price cut held steady from 2017; however, the number began to climb in July and August. The report indicates the sudden gain could be attributed to the slowdown of home price growth and inventory levels starting to rise. Mortgage rate increases may also be a contributing factor, as Freddie Mac’s latest Primary Mortgage Market survey revealed that mortgage rates are now at their highest level in seven years.
On the other hand, the increase in price cuts could signal a silver lining approaching for home in the seller’s favor to becoming a more balanced. It may be a while before we see a true buyer’s market, but the market is definitely changing, and hopeful buyers could soon find more affordable prices and lower levels of competition.
Still, not all buyers will benefit from these changes right away.
“Price reductions typically aren’t uniformly spread out across a given city – some neighborhoods might have a lot of listings with a reduced price, others may have none,” said Trulia Housing Economist Felipe Chacon. “Our research shows that price cuts are much more prevalent in high-cost neighborhoods, so budget-conscious buyers may have some trouble finding a bargain.”
According to the data, of the top 100 metros, 63 had a year-over-year increase in price cuts. The largest gains were typically found in some of the most expensive and fastest-growing cities. The West Coast saw especially large year-over-year increases in price reductions. Las Vegas had the largest percentage-point increase among all metros surveyed, climbing from 12.6 percent to 20.8 percent in August 2018.
The San Jose and Seattle metro areas tied for second rank among those with the largest year-over-year price cuts, both posting a 7.9 percentage-point gain year-over-year in August 2018.
Rounding out the top five were the Anaheim and San Diego metros with 5.7 and 5.4 percentage-point increases, respectively.
The Bad News – The Cuts Are Getting Smaller
“Although we’re seeing more price cuts nationwide, the reductions themselves are getting smaller,” Trulia stated in a recent press release. “For the 12 months ending August 2018, the median price reduction nationwide knocked 2.6 percent off the listing price. This has been declining steadily since 2012, when the median price reduction was 4 percent. The median value of a price reduction today is less than the median price reduction at the outset of the recovery in 97 of the 100 largest metros analyzed.”
This means that, while more homes across the US may be becoming more affordable, the difference buyers are likely to see will be far less significant than what they may have seen several years ago. Still, it’s good to remain hopeful. The changes taking place now may pave the way for more steady price lowering trends across a wider section of the market.