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For the most part, homeowners across the U.S. are sitting pretty these days. Home prices are going up, up, up—in the country’s hottest markets, it’s a full-throttle seller’s market. But not everywhere, or for every home. In fact, you can even find homes in the nation’s biggest metropolitan areas that have sat on the market for weeks, whose price has been reduced, then reduced again, whose owners are tearing out their hair, wondering why in creation their home won’t sell.
For sellers, this is a bummer. For buyers, not so much.
So we put our data team on the case to find those metros where the biggest percentage of price-slashed houses can be found. Bargain hunters, get ready!
“Despite the fact that home prices are now setting new records in most of the country, price reductions on listed homes are quite common,” says Jonathan Smoke, realtor.com®‘s chief economist. “A price reduction can happen for lots of reasons, including adjusting an unrealistic initial price, a new sense of urgency, or motivation by a seller, or declining market trends.”
Don’t forget that 86% of sellers are also buyers. Some of them would rather close faster than wait for the maximum price so they can snag their next home. And many are willing to lower the list price in the winter because they don’t want to risk waiting until spring.
For buyers, the prevalence of reduced-price homes is a signal to get more aggressive in their negotiations and to avoid getting emotionally attached to a property if it’s overpriced.
To pinpoint the markets with the best discount opportunities, our data team ranked the 300 largest metropolitan areas by the share of homes for sale that saw price reductions in the past year. A listing is considered to have a price reduction if its listing price of any given month is lower than the previous month.
The resulting list, which includes some of the country’s hottest real estate markets, shows how tricky it can be to predict the rise and fall of the market, and how local forces can outweigh national trends.
Median home price: $233,000
Share of homes with price cuts: 34.9%
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In summer 2014, crude oil was selling for $100 a barrel, then $80, then $50. In Midland, a Western Texas city that sits on the most prolific oil-producing formation in the U.S., well drillers pulled out and workers who had flocked to the city during its up-cycle were laid off. A proposed 53-story condo building in downtown was never built. The median home price in Midland, which topped $317,500 in mid-2014, fell to $233,000 last month. This former home of the Bush clan has been feeling the full pain of the oil crash.
“The oil and gas industry is such a large part of Midland’s economy that it impacts employment, housing, retail spending,” says Karr Ingham, a Texas economist who prepares a monthly Midland-Odessa Regional Economic Index. “Now we are waiting for the petroleum economy to bottom out and start to grow again—that’s when housing will start doing better, hopefully in the first half of 2017.”
2. Phoenix, AZMedian home price: $299,900
Share of homes with price cuts: 34.3%
Once a poster city for the housing crash, Phoenix is on a slow path to recovery. 2015 showed promising progress—the price increase rate surpassed 20% all summer. But the frantic pace didn’t last, and the market soon went back to normal. For most of 2016, the growth rate was contained at about 3%. Those sellers who had bumped up their asking price during the temporary boom were left to deal with a harsh reality.
“Buyers started rejecting the high prices by not making offers. And sellers, who were not seeing the reaction they expected, had to cut their price,” says Jeff Barchi, a Re/Max Realtor®.
Despite this relapse, Phoenix is poised for big potential in 2017. Our own analysis projects a 5.94% price increase and 7.24% sales increase, putting Phoenix at the top of our list for best housing markets of 2017.
3. Anchorage, AKMedian home price: $301,900
Share of homes with price cuts: 33.3%
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More listings, declining sales, and sliding prices summarize the housing market in Alaska’s largest city in 2016. With the oil industry depressed and the state struggling with an enormous budget deficit, potential buyers may feel too anxious to plunk down a down payment. A study by the University of Alaska Anchorage warned that Alaska’s economy is heading for a crash, with the potential for a long-term economic downturn.
At least four oil companies, including Shell and ConocoPhillips, have walked away from dreams of offshore oil in the Chukchi Sea, after disappointing test results. When executives and employees leave their homes behind, housing supply piles up, creating stiffer competition among sellers. In some cases, relocation companies will assume ownership and sell the homes. As their corporate clients are eager to get the properties off their balance sheets, some homes are sold at a loss, according to Alaska Dispatch News.
4. Austin, TXMedian home price: $386,600
Share of homes with price cuts: 31.5%
In recent years, Austin has basked in the glow of its burgeoning tech industry as well as its hipster vibe. But the region’s supercharged expansion is losing steam, according to the Federal Reserve Bank of Dallas. Growth in business activity has continued to slow down since late 2014, and jobs decline as the manufacturing and construction sectors fall.
Home prices are hitting a plateau. The double-digit increase in 2014 and 2015 came to an end in 2016, according to Aaron Farmer, president of the Austin Board of Realtors, in what he calls “market normalization.” In November, the median home price was only 3% higher than a year ago. Sellers who were not aware of the slowdown were left to find that their aggressive pricing strategy didn’t work anymore.
In suburbs like Round Rock and Dripping Springs, individual sellers also have to compete with a slew of newly built homes, says Farmer—always a tough position.
5. Springfield, ILMedian home price: $141,000
Share of homes with price cuts: 30.6%
An 18-month impasse over the state budget has cast a deep shadow over Springfield, Illinois’ capital city, where many work for the state government. Higher education institutions, including the University of Illinois at Springfield, and cash-strapped social service agencies have been the hardest hit. The housing market felt a ripple effect, too—a state of economic limbo always makes buyers concerned about their home’s value. For most of 2016, home prices in Springfield have stayed flat after rapid growth in 2015.
“The market activity won’t go back to 2015 levels until the government gives us the stability we need,” says John Klemm, president of Capital Area Association of Realtors. The current stopgap budget will expire on Dec. 31, leaving the fate of 2017 in the dark.
Homes that are priced above $400,000 have seen significant slowdown and subsequent price adjustments, Klemm says, but the entry-level tier, generally under $200,000, has been relatively unscathed.
6. Denver, COMedian home price: $490,500
Share of homes with price cuts: 29.5%
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Denver is one of the nation’s hottest markets, but gains in home prices seem to have plateaued as buyers’ price fatigue sets in. The median list price rose 6% in November from a year earlier. While that’s still one of the top increases in the country, it’s down from a whopping 36% surge in the same month from 2013 to 2014.
Denver is still largely a seller’s market, as homes in hot neighborhoods like Washington Park and Highland Park generate multiple offers. But disappointment may be hitting more and more sellers who saw their neighbors’ homes sold in lucrative deals and want to chase the rainbow themselves.
“Everybody wants to believe their home is the best home. But the truth is, your neighbor may have an extra garage, an extra bathroom, and a granite counter that you don’t have,” says Jeff Plous, a broker associate at ONE Realty. “A good home will move very fast, but a junk home in Denver is still a junk home. And it will sit on the market.”
7. Vallejo, CAMedian home price: $419,100
Share of homes with price cuts: 29.3%
About 30 miles west of San Francisco, Vallejo is one of the last parts of the San Francisco Bay Area that still boasts affordability. From 2011 to mid-2015, formerly downtrodden Vallejo went through a white-hot period when there were multiple offers for most homes, according to Ron Lee from Re/Max Gold.
“Some people went into the mentality that, ‘Oh, I sold my house too cheap.’ And then there’s the other side of the swing, that people went for higher than market price and hope to score big,” Lee says.
But even in a blazing market, this “start high and come down later” strategy can backfire. When sellers try to get more than their home is worth, their home will sit on the market longer, says Debbie Raynor from Re/Max Gold.
Since this summer, the Bay Area’s housing market has been showing signs of finally cooling off—a bit, anyway. But with prices still meteoric, Vallejo may continue to appeal to priced-out buyers.
8. Baltimore, MDMedian home price: $282,400
Share of homes with price cuts: 29.2%
For the past five years, home prices in long-troubled Baltimore have been climbing steadily but slowly. Buyers aren’t quite ready to ramp up their offer prices yet as they can jump over a neighborhood and find what they want. Places like waterfront Riverside and suburban Hampden are fetching good money, but in many parts of the city, homes seen as overpriced are not received well.
“Baltimore is not a city for multiple offers. If you price your home right, you will sell your home for just a little less than your asking price, and you should be happy with that,” says Realtor John Keller with Blue Star Realty.
No, Baltimore is not the next San Francisco. And doesn’t intend to be.
“In a way, [the price cuts] indicate the Baltimore market is a very practical market. That’s good for buyers,” says Steven Gondol, executive director of Live Baltimore, a nonprofit that tracks Baltimore housing data. “I would say it’s a more balanced market. There’s give and take from both sellers and buyers.”
9. Palm Bay, FLMedian home price: $261,500
Share of homes with price cuts: 27.9%
Florida’s housing market is renowned for its perennial boom-and-bust cycles, and Palm Bay is no exception. Just four years ago, Palm Bay led the nation with its foreclosure rate, as one in 158 homes had a foreclosure filing in November 2012, according to ATTOM Data Solutions. As the city pulled itself out of the bog—thanks to its recovering job market—it quickly entered a frenzied boom. 2015 was marked by a record seven-month streak of year-over-year growth that exceeded 30%.
Good news, right? Hold on. Just when sellers were jacking up prices and ready to make a fortune, the growth momentum dwindled. One reason is the waning international interest. Upon last check, homes are taking seven days longer to sell than in last November. Any overpriced homes will fall behind in the competition, and need a price reduction.
Anyone have a crystal ball? It’ll come in handy when trying to assess how to price a home in this market next year!
10. San Diego, CAMedian home price: $619,000
Share of homes with price cuts: 27.6%
San Diego real estate prices are through the roof, but the upper reaches of the market seem to be returning to Earth. The median days on market for million-dollar homes crept up from 70 to 74 since last year, and available homes grew 7%. Consequently, buyers are more likely to encounter a discount on those homes.
Luxury homes in inland neighborhoods like Rancho Santa Fe are having the hardest time, according to Seth O’Byrne of Pacific Sotheby’s International Realty. Amid California’s ongoing drought, buyers often shrug their shoulders at rolling hills of grass on 3-acre lots. Both baby boomers and millennials are shifting to simpler homes in coastal communities, O’Byrne says.
Inland neighborhoods see more markdowns among modestly priced homes, too. Some of the highest concentration of price cuts are found far from the coast, like Santee, Carmel Mountain, and Spring Valley.
The post Bargain Hunter’s Special: Top 10 U.S. Markets for Real Estate Discounts appeared first on Real Estate News and Advice - realtor.com.
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