At least 10% of home sellers in the 97 metropolitan areas analyzed by Redfin dropped their asking prices in June. Over three quarters of the metros in the analysis saw more than 25% of sellers drop their prices.
The formerly white-hot metro of Boise, Idaho saw both the largest share of home sellers dropping their prices at 61.5%, and the biggest year-over-year increase, as only 25.7% of home sellers dropped their asking prices in June 2021.
Boise was followed by Denver, which saw 55.2% of home sellers drop their asking prices, Salt Lake City at 51.6%, Tacoma, Washington at 49.5%, and Grand Rapids, Michigan at 49.3%.
Redfin attributes the large share of homes undergoing price reductions in these metro areas to the rapid home price appreciation recorded in the metros, as more and more people relocated during the COVID-19 pandemic due to increase remote work flexibility. For example, in Boise, the typical home sold for $550,000 in May, up more than 60% from two years earlier, according to Redfin.
In addition, rising mortgage rates are cutting the purchasing power of homebuyers, forcing home sellers to rethink their pricing strategy.
“Home sellers are contending with a rapidly changing market, especially in places where they’re used to their neighbor’s homes getting multiple offers and selling for more than asking price,” Sheharyar Bokhari, Redfin’s senior economist, said in a statement. “Higher mortgage rates and a potential recession are causing prospective buyers in popular migration destinations to press the pause button, and they’re also having a big impact on workers in big job centers who rely on their stock portfolio for down payments. In places like Denver, Seattle and Portland, some buyers feel less confident about their finances in the face of a shaky economy and faltering stock market.
At the other end of the spectrum were El Paso, Texas (13.3%), Newark, New Jersey (14.1%), Honolulu (16.8%), Milwaukee (17.4%) and New Brunswick, New Jersey (17.8%). Redfin attributes the relatively small share of price drops in these metros to more affordable home prices, that fall close to or below the national median sales price.
The share of homes with a price drop rose from a year earlier in all but four metros – Elgin, Illinois; Lake County, Illinois; Chicago, and Fresno, California, which saw year-over-year decreases.
“If demand plateaus in the coming months, price cuts are likely to be less common as sellers realize the market has shifted and price realistically from the start,” Bokhari said. “But if demand falls further, sellers will continue to play catch-up and cut prices to attract buyers.”
Redfin said its economists and agents are currently advising prospective sellers to list their homes sooner rather than later as they expect price growth to continue to slow. In addition, they recommend that sellers price their homes slightly lower than comparable properties in the neighborhood to increase interest in the property and avoid having to undergo price drops.
“Today’s sellers feel they’ve missed out on the hot sellers’ market and in some ways they have. They’re probably not going to get multiple offers and sell their home way over asking price, but we can still sell a home for a fair price,” Andy Potarf, a Denver-based Redfin agent, said in a statement.
