PROSPECTIVE home buyers are in luck because house prices have been dropping, offering lower prices and more negotiating power.
The number of homes with price drops last month increased to record levels, even in some of the largest US cities.
The number of home sellers lowering their prices increased last month to the highest levels seen since 2019, according to a report from Realtor.com.
“The percentage of homes with price reductions increased from 13.2% in February of last year to 14.6% this year,” said Sabrina Speianu, economic data manager at Realtor.com.
“This is the first time the share of price reductions has increased over the previous year since May of last year,” she added.
A rise in home listings with slashed prices suggests that more properties are on the real estate market and/or prices are higher than buyers are willing to pay, according to Hannah Jones, Realtor.com senior economic research analyst.
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“As a result, time on market increases and sellers start cutting prices to attract attention,” she noted, which provides buyers with greater negotiating power.
Not to mention, the price decreases are occurring in relatively large metropolitan areas. Of the biggest 50 US metros, over half experienced the share of price reductions increase year over year in February.
The following are the top 10 major cities that have experienced slashed prices, along with the percentage increase in the share of listings with a price reduction and the median list prices:
- Portland, Oregon: +8.8%, median list price: $600,000
- Miami, Florida: +5%, median list price: $550,000
- Tampa, Florida: +4%, median list price: $416,000
- Columbus, Ohio: +3.4%, median list price: $377,000
- Oklahoma City, Oklahoma: +3.1%, median list price: $323,000
- Memphis, Tennessee: +3%, median list price: $325,000
- Orlando, Florida: +3%, median list price: $435,000
- San Antonio, Texas: +2.9%, median list price: $335,000
- Dallas, Texas: +2.8%, median list price: $435,000
- Virginia Beach, Virginia: +2.8%, median list price: $385,000
PORTLAND PRICE DROPS
As part of our Let’s Get Real series, The U.S. Sun spoke with a prospective home buyer and realtor in Portland, Oregon, the city with the steepest home price reductions.
Haley Church, a prospective condo buyer, searched in the Lake Oswego neighborhood, which is encompassed in the Portland Metro area and located about seven miles south of downtown Portland.
Church noted that she saw a few price drops while looking at properties recently and that she was able to negotiate the price down on the condo she ended up purchasing.
The sellers of the condo had it listed as $445,000 despite a nearly identical unit selling in December for $425,000.
She offered $412,000 and ended up at $425,000, which the sellers declined. They thought about it over the weekend and accepted her offer the following Monday.
“I’m stubborn and I know my own financial situation and I’m not going to pay too much for a condo. I would like to make sure that it is worth exactly what I need it to be worth so if anything were to happen and I needed to sell it, I wouldn’t be so far in that I’d lose a bunch of money,” said Church.
WHY THE DECREASES?
Greg Lawler, Church’s realtor and a real estate agent of 17 years, shared how he has noticed similar price drops recently, and how they are a “hangover from the Covid market.”
He dubbed the market during that time a “unicorn market,” stating that we’ll probably never see a market like that again with such movement.
The pandemic resulted in record-low interest rates – around 3% – and many people wanting to move in search of more accommodating homes, such as ones with office spaces.
“There was a ton of movement. More buyers than we’ve probably ever seen in the market with low interest rates and that drove prices up,” shared Lawler.
In Portland, the home prices increased significantly, in some areas by around 40% during Covid.
Lawler gave the example of a home worth $600,000 that sold for $750,000. It did not sell at that price point because it was valued as such, but rather because it had 10 offers, forcing people to increase their offer to secure the home.
The realtor noted that the Covid market was going for around three years, lasting through the end of summer last year when interest rates crept up to around 8%.
“We saw a lot of [reductions] in the fall. The only way they could match the limited number of buyers, high interest rates, and get their house sold was to reduce it because their house wasn’t worth as much as they thought it was because they were comparing it to old numbers,” said Lawler.
Some homes saw four or five reductions – the realtor noted a home that was listed at $710,000 in September, which saw subsequent decreases to $699,000, then $675,000, and down to $655,000 recently.
“I think we’re probably going to see less price reductions as we move further into spring but we’re still seeing price reductions from houses listed in the fall,” he said.
HOW TO NAVIGATE THE MARKET
In Church’s case, the sellers of her condo were using a price point more aligned with numbers during Covid.
The similar condo sold in December for $425,000 was a much more accurate number for the current market.
When it comes to navigating the current market and assessing prices, Lawler suggested sticking to comparables.
Checking the prices of similar properties that have sold in the last three months or really close in time to when you are close to writing an offer can provide insight into accurate market value.
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