Buyers in some markets are already getting — or may soon get — some relief in the form of lower home prices, the pros say. Already, over the past 4-8 weeks, experts have noticed downward price pressure in higher priced markets that were previously robust. (See the lowest mortgage rates you can get now here.) “These were markets where the median ratio of sale price to list price was well over 5% above list price, and examples include San Francisco, San Jose, Austin, Denver, and Seattle,” says Chris Stroud, co-founder and head of research at HouseCanary, a technology-driven national brokerage that provides residential real estate analytics.
All of the cities listed above saw a fairly rapid decline in their respective median closing prices in July and August, as buyers no longer had to engage in bidding wars or bid above demand to be competitive. “Median close prices have largely stabilized in these markets for the most part over the past few weeks now that the excesses have been cleared from the system,” Stroud says.
Markets with the highest share of price cuts in July data from Realtor.com are mostly clustered in the Sun Belt and include Las Vegas, Phoenix, Austin, Sacramento, Denver, Portland, Dallas-Fort Worth, Nashville, Tampa and San Diego.
Where will we see house price declines in the future?
Those same markets could see more declines, says Realtor.com senior economist George Ratiu. “As we look to the next few months of rebalancing, we can expect these markets to feel increasing pressure on list prices as seasonal trends take deeper root and waves of buyer traffic from the peak of summer.”
For their part, a team of Goldman Sachs strategists said western metropolitan areas are more likely to see a price correction, and that’s “especially true for markets where housing affordability is low, like Seattle, San Diego and Los Angeles.”
Longer term, price declines will depend, in part, on where inventories are rising rapidly and excessively in conjunction with suppressed demand due to interest rates, experts say. “At the start of the rate increase period, the majority of markets were experiencing record inventories. This environment has so far prevented sharp price declines in many parts of the country,” says Stroud, who notes that this could to change.
Markets that have seen a particularly large influx of out-of-status people — places like Boise, Denver and Salt Lake City — may be more vulnerable to price cuts as the shift to remote working is largely over, says Kate Wood, home expert at NerdWallet. “It’s a double whammy for home sellers as the influx of people with deep pockets dries up and many local residents are now priced out of pocket. With home prices remaining high, these markets are still far from buyer-friendly, but sellers probably shouldn’t expect the bidding wars and contingency-free offers that have proliferated over the past couple of years,” says Wood.
As housing markets pull back on rising mortgage rates, prices and inflation, some of these markets are finding they have a growing volume of lingering inventory and not enough buyers, Ratiu says. . “For owners who are motivated to sell, the answer is increasingly old-fashioned: price cuts. Even as median list prices continue to rise — the result of homeowners pricing properties based on market data from months ago — rising inventory and dwindling buyer traffic are starting to exert pressure. downward pressure on prices,” says Ratiu.
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