Trying to buy a home over the past decade has been an incredibly stressful exercise.
While interest rates were low, and credit relatively easy to obtain, prices for housing moved up relentlessly.
Increasingly desperate buyers were forced to engage in bidding wars, waive inspections and even camp out for the chance buy a piece of the American dream.
The competition only intensified with the Covid pandemic. Employees, newly freed from having to work in the office, sought relief in lower cost communities away from the coastal enclaves that have traditionally seen the highest prices and bidding wars.
Meanwhile, those lucky enough to have a home could sit back and watch their net worth rise while occasionally taking out a home equity loan to buy necessities like vacations or sports cars or bitcoin.
Not any more.
With the Federal Reserve sharply raising interest rates to curb inflation, home sellers are having a rude awakening, at least in some markets.
Still, there is an ongoing debate about whether we’re heading straight into (or already are in) a housing bubble keeps on raging. While some analysts insist that years of unfettered home price growth inevitably leads to crashes, others point to still low inventory and the fact that even a double-digit drop in prices would still make homes in most markets more expensive than they were just a few years ago.
But whatever the outcome of the debate, there are cities where homeowners are doing the once unthinkable and cutting prices in the hopes of finding a buyer.
The get a better sense of the trend, a recent round-up by Realtor.com identified ten cities where the most listings have seen price cuts.
West Coast Schadenfreude (Is That Boom Finally Over)?
Home Sellers are Doing the Unthinkable (in Some Markets)
The leader, by far, was the city of Reno. The second-biggest city in Nevada has a median listing price of $677,500 but saw 32.6% of its listings with price cuts.
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The “price cuts are hitting hardest in markets which have been on a hot streak during the pandemic — cities which saw an influx of buyers looking for quality of life, more space, and affordability,” George Ratiu, senior economist at Realtor.com, said in a statement. “These are also markets which experienced a fast ramp-up in prices due to the inadequate supply of housing.”
The reason, according to the report, has to do with the disproportionate growth that occurred in some of the same places throughout the pandemic.
In Reno, home prices rose by over 22% between August 2020 and 2021. Texas’ Austin, which took second place on Realtor.com’s list, saw home prices rise by 27.1% in the same time period.
A year later, the median listing price there is $620,000 while 32.4% of recent listings had cut prices from the original listing.
Arizona’s Phoenix, another city that saw its median listing price soar to $620,000 due to an influx of professionals and businesses from nearby California, had 32.4% of its homes below below the original listing price.
Does This Mean I Can Come To These Places And Get A Cheap House?
The trend, by now, is clear — almost every city on this list saw a spike in new residents during the pandemic and had its sights set by developers as a city that was “exploding” into a prime investing opportunity.
What seemed like boundless growth may have led some homesellers to set overly inflated prices just to see if anyone would bite as a strategy. During the peak of certain cities’ popularity, this can sometimes work (in the first six weeks of 2022, around 500 Seattle homes sold for more than $100,000 above asking price) but eventually the market evens out to be more in line with real-life demand.
While the cities on this list reflect normalization after overhyped demand more so than a true return to affordability, some cities saw such spikes that the slashes are likely to continue into the coming weeks and even months.
“As the number of homes for sale grows, we can expect price reductions to become the norm, especially in high-cost areas,” Ratiu said. “For buyers, the change points to more opportunities in the months ahead, especially the fall and winter.”
SEE THE FULL LIST OF CITIES HERE.