Photo: Robert Clark
More sellers may be cutting prices, but the US housing market is still far from a buyers’ market.
National home prices hovered near record levels in August as inventory remained low, but buyers could see some relief on the horizon, according to a report released yesterday by Realtor.com.
“The rise in price cuts is one of the early signs of sellers beginning to adjust expectations, and if sustained, it sets the stage for buyers to gain more leverage,” Realtor.com director of economic research Javier Vivas tells Livabl.
Over the last year, the share of all listings that received a price cut rose 1.5 percentage points to 19.1 percent in August. The net share of price cuts among listings is now 1.5 times more common than in August 2012, when 13 percent of all listings saw price cuts.
Price cuts are also on the rise in markets where inventory is expanding.
The last week in August, national inventory recorded its first year-over-year increase in four years, according to Realtor.com.
However, both price cuts and inventory increases are occurring more frequently at the top of the market — in pricier and likely overvalued markets.
“The biggest jump in both volume and share of price cuts has emerged in the $350 to 750 thousand price tier, but the majority of buyers target $200 to 350 thousand tier, where the jump has been less notable,” says Vivas.
The trend would need to expand into more markets and price tiers to visibly ease the fierce level of competition seen in the market nationally, according to Vivas.
At the metro level, the frequency of price cuts grew nationally and in 39 of the largest 45 metros since last year.
The uptick was especially strong in some of the country’s hottest markets. The net share of price cuts in Seattle, Washington and San Jose, California rose 8 per cent and 7 percent, respectively, over the last year.
Some 28 percent of Seattle listings had a price cut in August, while the average listing price rose 14 percent year-over-year.
Nationally, the median listing price decreased by $4,000 in August, falling to $295,000 from a record high of $299,000 in July — the second largest monthly decline in three years.
Home prices were 7 per cent above last year’s median in August, but the year-over-year gain was smaller than the 10 per cent recorded in August 2017.
National home prices are rising three times faster than rents, and only about 40 percent of Americans live in a county where a median-income household can afford to buy the median priced home.
While the national unemployment rate remains at a 20-year low and job creation remains strong, home prices have grown three times faster than wages over the last five years.
“These dynamics are effectively working to keep the majority of the population away from the dream of home buying,” says Vivas.
Despite slowing price growth and deep price cuts, the market is still firmly in the hands of sellers.
“Nationally, we would need larger, more sustained signs of inventory recovery and price deceleration for at least another 24 months to truly see buyers regain the upper hand,” says Vivas.
Click here to read the entire report.