Asking prices for homes cool off
The pandemic era's cooling housing boom has turned many big-gain cities into markets where it's more likely sellers are cutting their asking prices.
My trusty spreadsheet analyzed a Zillow report on May's home-selling conditions in the nation's 50 largest metro areas — concentrating on what's behind reductions in listing prices.
The market clearly is softening, to use a polite phrase, as a combination of high prices and soaring mortgage rates created too many unaffordable options for house hunters.
Topline
In Los Angeles and Orange counties, 10% of homes listed for sale in May saw reductions in their asking price, but that ranked only 33rd highest among the 50 metros. In the Inland Empire, 13% of listings had price cuts, the 12th highest. Nationwide, price cuts were found in 12% of all listings vs. 8% in February.
May's highest price cuts were found in New Orleans and Salt Lake City at 16%, followed by Sacramento at 15%. The metros with the fewest cuts were found in Virginia Beach, Boston and San Jose, all at 8%.
Details
Let's look at the 50 metros, sliced into thirds by a ranking of price cuts.
Asking price reductions were more likely to occur where home values had greater appreciation. The 16 metros with the most price cuts had home values up an average 24% in a year vs. 18% in the 16 metros where price cuts were rare. Sellers may have misread the durability of recent price gains.
L.A.-O.C. had the No. 22 gain, up 21% over 12 months. The Inland Empire was No. 15 at 26%. Nationwide: 24%.
Raleigh and Tampa had the largest appreciation of the 50 at 37%, then Orlando at 33%. The smallest increases were found in Washington at 10%, Baltimore at 11%, Milwaukee and Pittsburgh at 12%.
Owners are adjusting prices more frequently as fewer sales contracts are signed. So-called “pending sales” fell an average 21% in the past year in metros where the most price cuts fell vs. down 19% where price cuts were scant.
L.A.-O.C. pending sales were down 24% in the last 12 months, the 13th biggest drop. The Inland Empire was off 17%, the 15th smallest dip. Nationwide? Off 20%.
The biggest declines in dealmaking were seen in Salt Lake City, down 38%, Miami, down 33%, and Hartford, down 31%. Just two markets had gains in pending sales — Birmingham, up 6%, and Memphis, up 5%.
Bottom line
Some sellers are feeling the house hunter's financial pain — and discounting their listings to meet shrinking demand.
Zillow estimated what monthly payment a buyer might get in May in each of the 50 metros. The payment includes principal, interest, taxes and insurance for the typical home, assuming a 30year fixed-rate loan with a 20% downpayment at 5.23% vs. the 2.96% rate of a year earlier.
Again, discounts followed bad news. Metros with the most price cuts had average hikes in projected payments of 52% vs. 44% where discounted listings were harder to find.
L.A.-O.C.'s payment jump was 52% — and it was only the 19th largest hike! The Inland Empire was No. 14 at 56%. Nationwide? 47%.
Raleigh topped this ranking at 70%. Then came Tampa at 66%, and Las Vegas at 65%.
Even the nation's “smallest” payment leaps were scary. Milwaukee was 34% pricier over 12 months, Pittsburgh was up 35%, and Hartford and Minneapolis rose by 37%.