Home sellers will likely drop listing prices this fall to attract buyers who have been waiting for better deals, according to research center Redfin’s July 2014 Housing Market Tracker report.
“Sellers are finally catching on that it’s not a seller’s market anymore,” Virginia-based Redfin agent Jeremy Cunningham tells Redfin.
A slowdown in home price growth and flat residential real estate growth — the first in five months — are spurring the housing activity change.
In addition, a shift in pricing power from sellers to a more balanced market will also drive a fall surge in home sales.
“The price drops are often done in small amounts of just a few thousand dollars around particular milestones — two weeks on market, 30 days on market, etc,” Boston-based Redfin agent Adam Welling tells Redfin. “When a buyer sees a price drop, she takes it as ‘blood in the water’ and wonders what’s wrong with the house and wants to negotiate for an even lower price.”
That shift has been in motion since when sales began to first decline last November, data show. As a result of this shift, the number of homes that sold above list price in July is down nearly 7 percentage points to 20.1% from 26.8% a year ago, the biggest drop of the year.
The percentage of price drops in July of this year was higher than the two previous years and has bolstered a closer alignment between seller and buyer expectations on price, Redfin says.
“We expect the confluence of these two trends to drive an unusual surge in home sales this fall,” Redfin says. “We also expect prices to continue to flatten, and to potentially decline month over month in September or October. If that happens, it will be the first three-month price decline since the fall 2012.”
Price drops are most prevalent in markets that have seen a big buildup in inventory and/or a sizeable increase in home price appreciation over the past year. In Denver, the metro area with the largest percentage of listing price drops, the median sales price has increased by 15% year over year, compared with an average of 5.5% for all metros.
While it’s typical for home price growth to slow from June to July, what’s atypical is the amount of variance across markets, Redfin says.
“Some markets are still overheated while others have cooled too much,” Redfin says. “By year end we expect an increase in the number of metro areas that exhibit a sustainable level of price growth that can be supported by local economies.”
Read the full report here.
Written by Cassandra Dowell