According to a survey by real estate data companies, home retailers are cutting prices significantly as the housing sector cools.
According to Altos Research, more than 25% of homes currently on the market have been reduced, which is in stark contrast to the rise in prices over the last two years.
Mike Simonsen, co-founder and CEO of real estate analytics firm Altos Research, told MarketWatch: “And what we feel is the speed of the shift.”
Frankly, “we’re moving from a real buying frenzy to a much more normal state,” he added.
The US housing market boom in the midst of a pandemic was felt nationwide. In high-demand areas such as San Jose, California, the value of a typical home as of May 31 was $ 1.5 million. According to Zillow. It is up 23.7% from the previous year. In May 2020, a typical home in the Bay Area was valued at $ 1.09 million.
Under normal conditions, about one-third of homes for sale will be reduced before they are put up for sale, and will drop to 25% when the market is hot, according to Simonsen. But this spring, only 14% of the homes on the market cut prices. And that reflects high demand and low inventories.
“Sellers over the last two years can still get offers even if they set a high price for their home. It’s a much more normal market because the frenzy is gone,” says Simonsen.
As buyers slowly recede, that percentage is now rising, and this trend is supported by a survey by real estate agent Redfin.A few 21% of sellers have lowered their list price According to Redin, in the four weeks leading up to June 5, it has the second highest market share ever, dating back to 2015.
Sellers will need to lower their asking price by the end of summer. “Please expect it to return to normal nationwide by July,” Simonsen added. “More than two years after the pandemic began, we’ve been hotter than usual. By August, unprepared sellers will be surprised.”
Good news for first-time homebuyers
The average home price for homes sold in the United States was $ 428,700, a record high for the first quarter of 2022, from $ 313,000 in the first quarter of 2019 before the COVID-19 pandemic. Data from the St. Louis Federal Reserve Bank. Price cuts can range from over $ 5,000, depending on the value of the home, Simonsen said.
There may be some reassurance for first-time homebuyers who have been out of reach due to gradual increases in prices over the last two years. “If people want to buy a home, they’ll probably be overpriced by someone who has full cash, or by an investor,” Simonsen said. “But now, choices are increasing, competition is decreasing, and they finally have the opportunity to buy.”
But don’t expect prices to bottom out yet. “There is no data yet to show that home prices are plummeting,” Simonsen said. However, “there are probably signs that house price increases will be zero in 2023.”
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