What Goes Up Must Come Down: The Pandemic Era’s Hottest Markets Are Leading the U.S. in Price Reductions

Real Estate Price Reductions Data

Photo-Illustration by Realtor.com / Getty Images (2)

For those looking to sell their home, many have been forced to face the fact that they won’t get the price they’d dreamed of receiving anytime soon.

To close sales, more sellers are dropping asking prices than at any point in the past few years. The portion of homes on the market with at least one markdown is now outpacing even pre-pandemic years. Buyers simply can’t afford these high price tags now that mortgage interest rates have shot up.

In some parts of the country, as many as half of the homes on the market have had their price cut, making up, at least partly, for the higher monthly payment resulting from the currently hiked interest rates.

So where can buyers find the most discounted homes? And where do sellers need to be more realistic with their asking prices?

The Realtor.com® data team dug into our listings to find out. It turns out, sellers are slashing prices largely in the areas that had been hottest for the past two years. Markets that had become magnets for those fleeing the coastal population hubs, mostly in up-and-coming metros in the West and the South, are now seeing record levels of listing price cuts.

“The unifying thread among these states,” says George Ratiu, senior economist and manager of economic research for Realtor.com, “is they have all seen a significant influx of buyers of the last 2.5 years.”

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Seven of the top 1o states seeing the biggest increase in home price reductions are in a contiguous chunk of the western United States: Arizona, Nevada, Utah, Colorado, Idaho, Washington, and California. The remaining three are Southern Sun Belt states that similarly drew lots of newcomers: Texas, Georgia, and South Carolina.

“By and large, they offer an ideal combination of quality of life and outdoor amenities,” Ratiu says. If buyers can afford them.

Post-pandemic, those elements brought people from heavily populated, expensive urban hubs like New York City, San Francisco, and Chicago to places like Boise, ID; Austin, TX; Atlanta; or Salt Lake City.

“These new buyers drove up local market prices,” Ratiu says, “in some cases, even beyond local residents’ ability to compete.”

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The other similarity in the places seeing the most price cuts is the prevalence of seasonal buyers—whether retirees shopping for a winter condo in the suburbs of Phoenix, or Seattleites looking for a second home in Boise. During the COVID-19 pandemic, many buyers rushed to purchase vacation homes. Now that mortgage rates are higher, the stock market is suffering, and inflation is high, many buyers are holding off on nonessential real estate purchases.

“When borrowing money is expensive, they tend to be the first to pull back,” says Ratiu.

Not all sellers have yet come to terms with a quickly shifting market, which demands lower prices.

And when sellers attempt to take advantage of the “aspirational pricing” that defined the past couple of years, but the property doesn’t sell, they’re left with only one option: Drop the price.

We used Realtor.com listing data, which comes from multiple listing services around the country, to see where the October year-over-year portion of homes for sale with a price reduction has increased the most.

These are the states where buyers can find the most price reductions.

Where home sellers are cutting prices - data
Where home sellers are cutting prices

Realtor.com

1. Arizona

Median listing price: $465,000
Portion of listings with a price reduction in October 2022: 40%
Difference since October 2021: +30%

Arizona has seen wild swings in real estate prices through the past few cycles: Values went through the roof in the mid-2000s, before becoming an emblem of the real estate crash in 2008. So dramatic was the fall in values and demand that entire neighborhoods in the suburbs on the edge of the Phoenix metro area were filled with brand-new homes that remained empty after buyer demand evaporated.

In the past few years, a feeling of déjà vu has been understandable, as listing prices again soared during the pandemic—up 60% for the Phoenix metro area between late 2019 and May of this year, according to Realtor.com data. 

“We’ve never experienced anything like we did in 2020 and 2021,” says Andrea Crouch, the Phoenix Realtors® board president, of the price run-up of the past few years.

So the current mass reduction in home list prices, Crouch says, is to be expected.

“It is a correction that needed to happen,” she says. “As soon as interest rates increased in April, our price reductions started going through the roof.”

Arizona has gone from 1 in 1o listings with a price reduction a year ago to now more than 1 in 3. Now, it’s a matter of getting sellers to understand that the market is not going to be as kind to them as it has been for the past few years, Crouch explains.

“Sellers have been shooting for the moon, and they could, but now they have to come down to Earth,” She says. “The reality is homes that sell are priced right.”

2. Nevada

Median listing price: $469,000
Portion of listings with a price reduction: 37%
Difference since October 2021: +23%

If there’s another market in the West that has come to define the current boom-bust real estate pricing cycle, it’s Las Vegas. And again, Nevada is at the top of the list of where the housing market has turned.

The many attributes of the state—as Realtor.com’s Ratiu defines them, “no state income tax, along with a low cost of living and relatively more affordable housing”—made it a natural place for a fast, seller-friendly market during the early part of the pandemic. It’s no wonder, he says, that prices rose quickly. And now they’re falling fast.

A year ago, only 1 in every 7 listings was marked down from their initial price, and now it’s more than 1 in 3. In just the past month, the portion of homes listed with a price reduction has jumped by 2.6%, and prices are down by around 7% since the summer.

For shoppers looking in the Silver State, it’s not hard to find homes with reduced price tags. These new three-bedroom townhomes in Sparks, east of Reno, for example, are marked down $44,000, or about 12.5% from their initial listing six months ago.

3. Utah

Median listing price: $560,000
Portion of listings with a price reduction: 32%
Difference since October 2021: +22%

Utah saw a massive influx of new residents in the past decade, with a population increase of around 17%. The state’s abundance of outdoor activities brought in even more demand during the pandemic.

But after the run-up in values, prices are down around 12% in a place like Ogden, the Utah city with the highest portion of homes marked down, at 42%. The metro, about 30 minutes north of Salt Lake City, saw prices rise by 75% between late 2019 and mid-2022. So even with the price reductions, homes are still well above their pre-pandemic price.

And it doesn’t take much searching to find the big discounts. This new, large four-bedroom home in Saratoga Springs, about 45 minutes south of Salt Lake City, is now listed for $654,000, after being listed for $730,000 in June.

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4. Colorado

Median listing price: $585,000
Portion of listings with a price reduction: 29%
Difference since October 2021: +18%

Almost 30% of all homes for sale right now in Colorado, an outdoors and craft beer lovers paradise that became fantastically popular with buyers during the pandemic, have had their price chopped. That’s higher than it’s been anytime in the past five years.

In Colorado Springs, where the figure is even higher, at 39% of listings with a price reduction, this medium-sized, three-bedroom home is now listed with a 7% price reduction, which is just a little below the metro’s 9% decline in median listing price since June.

For those looking at high-end real estate at a discount, take this enormous ski resort Shangri-La that is now marked down by more than $700,000. The home, located in the posh Snowmass Village, located just outside Aspen, in the heart of the Rockies, can be yours for only $6.2 million, a 10% markdown.

5. Idaho

Median listing price: $539,000
Portion of listings with a price reduction: 37%
Difference since October 2021: +17%

Potatoes. That’s what Idaho used to be known for. The tubers were practically synonymous with the state. But not anymore.

Idaho’s population has grown by nearly 20% in the past 10 years, as more and more people have flocked to the state for its temperate climate, easy access to mountains and rivers, and historically affordable housing.

“Traditionally we’ve lagged in value,” says Bonnie Burry, a designated broker at Windermere Powerhouse Group in Boise. “It’s been a hidden gem, really, but then we got discovered.”

Sure enough, Idaho’s nickname is the Gem State, and prices there indeed dazzled during the pandemic. Median home prices in Boise, the epicenter of the state’s exploding demand, grew by a whopping 70% from late 2019 to early 2022.

“There was some making-up for us being underpriced,” Burry says. “Then we caught up, and more.”

Prices in Boise are down 13% since May, and Burry says she advises sellers to take what they think they might have been able to get in the spring or early summer, and cut 20% off.

“The seller might be up 40% since they bought,” she says, “so if they’re coming down 20% now, they’re still doing really well.”

6. Washington

Median listing price: $600,000
Portion of listings with a price reduction: 25%
Difference since October 2021: +15%

Washington has seen a huge surge in real estate valuations in recent years, with prices in the already expensive Seattle area shattering records and places like Spokane seeing their real estate markets go from mundane to frantic. But like other Western states on this list, Washington has seen its fortunes flip.

In Seattle, more than one-quarter of listings are marked down. To the southwest of Seattle, in Olympia, 30% of listings are discounted.

And whether you’re looking for a big upgrade or a starter home, price reductions are easy to find.

If you’re in the market for a high-end home on the edge of the Puget Sound, for example, but don’t want to pay full price, this three-bedroom farmhouse with views of the Olympic Mountains has been discounted $245,000 and can be picked up for just $1.95 million, an 11% markdown since it was listed April.

For the buyer looking for something less pricey, this two-bedroom, manufactured home in Everett, 25 miles north of Seattle, is now priced at $150,000. It was initially listed at $175,000, down about 14%.

7. California

Median listing price: $699,000
Portion of listings with a price reduction: 23%
Difference since October 2021: +15%

California has been one of the nation’s costliest real estate markets for years. Competition and prices are high for homes near the scenic coast. Plus the state has high taxes and a general lack of enough housing. But this could be the right time for buyers who have been waiting out the pandemic’s price pump to swoop in.

Fewer than 1 in 10 listings was marked down this time last year, but now it’s almost 1 in every 4.

This palatial five-bedroom, Mediterranean-style home surrounded by a dense canopy of palm trees in the city of Corona, about an hour east of Los Angeles, has had a cool $100,000 knocked off the top. It’s now priced at $1.35 million. Bargains in this state are relative.

8. Texas

Median listing price: $371,650
Portion of listings with a price reduction: 25%
Difference since October 2021: +14%

The Lone Star State has had a renaissance in recent years, with the capital and tech hub of Austin becoming a magnet for people looking for a vibrant urban scene, bustling with industry and culture, but with all the benefits that Texas offers compared with high-cost coastal cities—notably cheaper home prices and the absence of personal income taxes.

The whole state benefited during the pandemic, as people saw it as a place to bring their swollen equity from higher-priced areas and upgrade to something larger, on a bigger lot, with money left over.

But what goes up, must come down, and this real estate icon of the pandemic era has seen prices getting slashed. Fully one-quarter of all listings have had their price reduced.

This midcentury four-bedroom home in the Great Hills neighborhood north of Austin is being offered at $499,000, a $75,000 price reduction, or a 13% markdown, after going up for sale in August.

9. Georgia

Median listing price: $375,000
Portion of listings with a price reduction: 22%
Difference since October 2021: +14%

The real estate market is beginning to look peachier for buyers seeking discounts in Georgia. Buyers looking at new construction are getting massive discounts right now, says Maurice Royster, a real estate agent at Royster Realty Group with Keller Williams in Marietta.

“One person I was dealing with got a $45,000 price reduction on a home that was already under contract,” Royster recalls, and that was after the home had been marked down by the builder once from $428,000. They picked up some of the closing fees, too.

In the resale market in Georgia, Royster says he’s seen sellers who have been pricing their homes as though the conditions from six or 12 months ago are still in place, hoping they can be the last one to take advantage of that seller’s market.

The result, he says, is homes that end up being priced incorrectly, leading to price drops after the home is on the market for longer than the seller anticipated.

“If it’s priced higher than it should be, then you’re going to do a bunch of price reductions,” Royster says. “You can’t chase a ball down a hill.”

10. South Carolina

Median listing price: $354,230
Portion of listings with a price reduction: 22%
Difference since October 2021: +13%

South Carolina is another of the Southern states that saw pandemic buyers flocking there from more expensive, dense urban hubs.

“South Carolina is smack dab in the middle of the East Coast, but it’s got beautiful weather, low taxes, high quality of life,” says Owen Tyler, managing broker of The Cassina Group in Charleston.

That led to spiking demand and prices that climbed more than 30% during the pandemic. But in some of the Palmetto State’s bigger cities, prices are down close to 10% since the peak earlier this year.

For some sellers, the rapid decline in demand is a tough pill to swallow.

And while it might not be what sellers want to hear, for buyers, things are far easier now.

“If you’re a buyer, this is such a better time than 90 days ago,” says David Kent, owner and broker at The Real Buyer’s Agent, in Charleston. “I think the buyer has an opportunity to take a breath. They don’t have to waive inspections or appraisals. They don’t have to get into a bidding war.”

The post What Goes Up Must Come Down: The Pandemic Era’s Hottest Markets Are Leading the U.S. in Price Reductions appeared first on Real Estate News & Insights | realtor.com®.

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