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A new report shows that homebuyers are receiving some of the highest interest rates price discounts recorded as sellers adjust their expectations.
Zillow found that the average US listing saw $25,000 in cumulative price cuts in October, which was the largest discounts the company has ever recorded.
The typical size of an individual price reduction is little changed from recent years, around $10,000, but the report noted that sellers are adjusting their sale prices more often as listings take longer to move. According to the report, the share of listings with price reductions is 26.9% of all US listings.
“Most homeowners have seen them values of the house have soared in recent years, giving them the flexibility to make one or two price cuts while still walking away with a profit,” said Kara Ng, senior economist at Zillow.
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Buyers in California have enjoyed some of the biggest discounts compared to the original listing price. (Loren Elliott/Bloomberg via Getty Images)
“These discounts will bring more homes in line with buyers’ budgets and help fuel the most active housing market in three years,” Ng said. “Patient buyers are reaping the rewards as the market rebalances.”
Zillow noted that the areas with the largest average discounts to the initial listing price were in some of the most expensive housing markets in the country.
Cutbacks by sellers San Jose average cumulative discount of $70,900, the largest of any market.
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Sellers lower prices to attract buyers and exchange some of their shares to stimulate activity. (Andrew Burton/Getty Images)
Other California metropolitan areas saw significant average reductions of $61,000 in Los Angeles, $59,001 in San Francisco and $50,000 in San Diego – while New York City also saw an average cumulative price reduction of $50,000.
In some metropolitan areas, home sellers haven’t had as much flexibility to lower prices. The smallest cumulative average price reductions in October were in Oklahoma City ($15,000), Louisville ($15,000), St. Louis ($15,100), Indianapolis ($16,000) and Detroit ($17,100).
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A home for sale in Austin where buyers have enjoyed some of the biggest discounts from the initial sales price. (Photo by Brandon Bell/Getty Images)
Apart from Oklahoma CityIn these urban areas, homes sell faster than the national average and listings tend to be newer, indicating that demand is stable and sellers don’t have to make big price cuts to attract a buyer.
Markets that had less expensive homes to begin with tended to have larger relative discounts for buyers. Pittsburgh had a typical downgrade of $20,000 at about 9% of the metro’s typical home value, which was the largest relative discount among major markets, according to Zillow’s report.
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New Orleans also had a discount of about 9% from the typical home value on the market, while buyers saw price reductions of similar magnitude in Austin (8.4%), Houston (8.2%) and San Antonio (7.9%).
