What city has seen biggest discounts?
The pandemic era’s cooling housing boom has turned many biggain 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.
Top line
In Los Angeles and Orange counties, 10% of homes listed for sale in May saw reductions in their asking price, but that ranked only 33rdhighest 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 versus 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, Virginia; 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.-OC had the No. 22 gain, up 21% over 12 months. The Inland Empire was No. 15 at 26%. Nationwide: 24%.
Raleigh, North Carolina, and Tampa, Florida, 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 versus down 19% where cuts were scant.
L.A.-OC pending sales were down 24% in the past 12 months, the 13th-biggest drop. The Inland Empire was off 17%, the 15thsmallest dip. Nationwide? Off 20%.
The biggest declines
in deals were seen in Salt Lake City, down 38%; Miami, down 33%; and Hartford, Connecticut, down 31%. Just two markets had gains in pending sales — Birmingham, Alabama, up 6%, and Memphis, Tennessee, 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 30-year fixed-rate loan with a 20% downpayment at 5.23% versus 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 get.
L.A.-OC’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%.