Tag: Zillow

Southern California home values near record despite the high cost of borrowing

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Southern California home prices are nearing a record high at a time of sky-high mortgage rates, a double blow that’s hammering housing affordability across the region.

In October, the average home price for the six-county region climbed 0.12% to $831,080, according to data from Zillow. It was the eighth consecutive monthly increase, leaving prices just 1% below the all-time high reached in 2022.

“I don’t understand how people are affording these insane mortgages,” said Nicholas Uribe, a 31-year-old property manager who is trying — so far unsuccessfully — to buy a single-family home in the San Fernando Valley.

Although prices are slightly lower than during the peak, a home is drastically more unaffordable. In October, the monthly payment on the typical L.A. County home was $4,830, according to Zillow. In June 2022, when prices peaked and rates were lower, the typical payment was nearly $900 less.

Some experts say they don’t expect prices or mortgage rates to drop considerably in the near future — a forecast that, if realized, could dash the hopes of people like Uribe.

In theory, he should be better off than he is. In 2019, he paid $329,000 for a Sylmar townhome that his agent now estimates is worth about $500,000.

He’s also making more money. But despite his higher paycheck and home equity, he feels stuck.

With interest rates roughly double what they were in 2019, Uribe said he could barely afford to buy a comparable townhome at today’s prices, let alone the single-family home he’d like to trade up to.

With today’s rates, the top of his budget is about $500,000, which he said “gets you nothing in the San Fernando Valley.”

On a recent afternoon, only three San Fernando Valley houses were for sale on Redfin priced at $500,000 or less. One was accepting only cash. All three were one- or two-bedroom abodes that were smaller than Uribe’s townhome and appeared run-down.

The trend of declining affordability is playing out across the country. How the nation and Southern California arrived at this moment, experts say, is a tale of under-building, pandemic trends and federal monetary policy.

During the height of the pandemic, people rushed to purchase a home, motivated by stay-at-home policies and mortgage rates driven to record lows by the Federal Reserve’s easy money policies. That demand surge collided with a shortage of homes for sale and caused prices to skyrocket.

But as inflation soared, the Federal Reserve reversed course, tightening policy in a switch that helped send mortgage rates sharply upward. From November 2021 to November 2022, rates climbed from below 3% to 7%.

Initially, prices in Southern California fell as shocked buyers backed away and inventory swelled. Then the flow of homes hitting the market ground to a near-halt.

Increasingly, homeowners chose not to sell and give up their rock-bottom mortgages. Some like Uribe couldn’t afford to move. Others could but thought it a bad deal to pay so much in interest.

When rates dropped into the 6% range and then stayed there for much of this year, it wasn’t enough to entice back many sellers. It did bring back a fair number of well-heeled buyers — especially first-timers without a mortgage — who decided they had put off their home purchase long enough.

According to a Zillow survey done earlier this year, half of recent home purchasers were first-time buyers, which the real estate firm said is probably the highest share since around 2010 when a first-time buyer tax credit juiced demand.

Demand for housing remains weaker than during the pandemic, but the combination of a little more demand and a lot less supply has been enough to push prices up.

In Southern California, home prices bottomed in February. The median price has risen 8% since then to come in just under the all-time high of $839,674.

In recent months, mortgage rates have surged past 7%, further crimping the budgets of potential buyers.

According to the California Assn. of Realtors, only 11% of households in Los Angeles and Orange counties could afford the median-priced house in the third quarter, the lowest level since the mid-2000s housing bubble.

Looked at another way, a median-income household in those two counties would need to fork over 76.5% of its income to afford the average-priced house in September, according to Intercontinental Exchange, a financial services firm.

The September payment-to-income ratio is the highest level in a data set that starts in 1992 and contrasts with a long-term average of 35.6%.

Andy Walden, vice president of enterprise research with Intercontinental Exchange, called today’s current levels of affordability unsustainable, but said that doesn’t mean prices will fall.

“Sometimes a correction means home prices grow at a lower rate than incomes,” he said.

That process could be underway. While prices rose in October from September, the increase was the smallest since values resumed their climb earlier this year.

Nicole Bachaud, a senior economist with Zillow, said part of the current downshift is seasonal.

Overall, Zillow predicts home prices across Los Angeles and Orange counties will dip 1.5% over the next year. In the Inland Empire counties of Riverside and San Bernardino, prices should rise 0.2%.

Bachaud said home prices should be more or less flat because the lack of affordability will serve as a ceiling, while tight inventory will serve as a floor.

A substantial increase in inventory could ease the experience for buyers, and there have been minor signs of improvement.

In Los Angeles County, Redfin data show the number of new homes hitting the market each week is now 2% below year-ago levels, compared with 30% declines seen earlier this year.

Experts said more homeowners may finally be done waiting and are choosing to sell. But buyers shouldn’t expect a surge of additional options any time soon.

More than 60% of all U.S. homes with a first-lien mortgage have rates below 4%, according to Intercontinental Exchange data, and the gap between the rate homeowners have and the rate they’d get in today’s market is the largest since 1980.

That gap — and the disincentive to sell that it brings — should shrink over time as more people decide they must move and rates retreat a bit, Walden said.

“But it’s going to take years for that to take place,” he said.

In the meantime, people wait.

Shawna Jamison is one of them. She hoped to be out of her 565-square-foot San Diego condo by now, but a combination of personal and market factors have kept her there.

The 37-year-old bought her San Diego unit nearly a decade ago, then a few years later moved to Orange County for a job promotion and rented the one-bedroom out.

The plan was to transfer back to the San Diego office in several years and buy a bigger place in the city she loved. But the pandemic delayed office transfers and permanent work from home policies weren’t established, giving the software analyst pause about moving back south.

It wasn’t until late 2022 that she got the OK to transfer to San Diego. She returned to her condo, but by then mortgage rates had surged.

She’s searched for a larger home ever since, but can’t find anything within her budget.

“I was waiting for my personal situation to align,” she said. “But as soon as my personal situation aligned, the interest rate situation is a disaster.”

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Andrew Khouri

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November 16, 2023
Study: Living Happy Life Strongly Correlated To Thinking About Property Values All The Time

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AUSTIN, TX—Discovering a clear link between obsessively reflecting on appreciating assets and overall contentment, a study published Monday by the University of Texas found that living a happy life was strongly correlated to thinking about property values all the time. “Our data clearly indicates a direct relationship between the amount of time someone spends refreshing Zillow listings for properties in their area and the amount of fulfillment they have in their lives,” said head researcher and economist Lyle Granger, explaining that rates of personal satisfaction skyrocket every time one attends a city council meeting to rail against subsidized housing units because of what they might do to home prices in the area. “When thinking about happiness, it’s important not to consider neighborliness or solidifying your bond with your community, but to think instead of how the race and socioeconomic background of those living around you will affect the resale value of your house in 30 years.” Granger emphasized that everything in one’s life would fall into place as long as one maintained a singular focus on home values.

Pope Francis Declares Nothing Wrong With Guy Giving Buddy Tug Job After Few Drinks

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August 21, 2023
U.S. Debt Default Would Cause Mortgage Rate Spike, Home Sales Slump

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U.S. debt default would cause borrowing costs to jump.

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A default on the nation’s debt, if Congress is unable to raise the federal debt ceiling in coming weeks, would boost mortgage rates by at least two percentage points and cause a slump in home sales as costlier financing puts real estate beyond the reach of more Americans, according to Jeff Tucker, a Zillow senior economist.

While it’s still unlikely the federal government will fail to pay its bills, the chances have increased in recent weeks because of an ongoing stalemate in Congress, Moody’s Analytics said last week. The chance of a debt default now stands at 10%, up from a previous estimate of 5%, the research firm said.

“Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs, just when the market was beginning to stabilize and recover from the major cooldown of late 2022,” said Zillow’s Tucker.

The average U.S. rate for a 30-year fixed home loan likely would rise to 8.4% in coming months, he said, from last week’s 6.35%, as measured by Freddie Mac. That increase in borrowing costs would cause home sales to slump by 23%, while the U.S. unemployment rate likely would balloon to 8.3% from last month’s 3.4% as the economy entered a recession, Tucker said.

It would be a “self-inflicted disaster,” Tucker said.

Jaret Seiberg, the housing policy analyst for Cowen Washington Research Group, views Tucker’s estimates as possibly too conservative.

“Our view is that the Zillow report may be a best-case scenario as our concern is that credit markets will freeze up if there is a default,” Seiberg said.

Comments made by former President Donald Trump during a CNN “Town Hall” last week increased the chances of a debt disaster, Seiberg said. Trump told CNN’s Kaitlan Collins a debt default “could be nothing” and might be just “a bad week or a bad day.”

That stands in stark contrast to remarks he made while he was in the White House. On July 19, 2019, Trump described the nation’s obligation to pay its bills as “a very, very sacred thing in our country” and added, “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge.”

With a razor-thin Republican majority in the House of Representatives, even a few hold-outs inspired by Trump’s remarks could doom a chance to come to an agreement about raising the debt cap, Seiberg said. Negotiations over the debt ceiling aren’t about how much to spend – they’re about paying bills already incurred.

“We continue to view a default as unlikely, but that is premised on our belief that politicians realize how dangerous a default would be for the economy,” Seiberg said. “The problem is that unlike in prior fights, not every political leader agrees, as we heard this week from former President Donald Trump. It is why we cannot rule out a default.”

While economists agree that a failure of the U.S. government to pay its bills would be a recession-inducing catastrophe, they don’t agree on the “X date,” meaning the day a default would begin. Treasury Secretary Janet Yellen puts the month as June, and the earliest potential day as June 1. The U.S. Treasury said in January it would use “extraordinary measures” to move money around to delay a default as long as possible.

Goldman Sachs economists estimate the U.S. “will likely exhaust its cash and borrowing capacity by late July.” Zillow puts the default date as “almost certainly by August, depending on the flow of income tax receipts this spring.”

“It is impossible to predict with certainty the exact date when Treasury will be unable to pay all of the government’s bills,” Yellen told the Independent Community Bankers of America on Tuesday. “Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy.”

The mortgage market is already showing signs of investor fear. Last month, the spread between 30-year fixed mortgage rates and 10-year Treasury yields reached the widest in almost 40 years. When spreads are wide, the mortgage rates that track the 10-year Treasury yield are higher than they normally would be as investors demand a risk premium.

In May’s first week, the spread was 2.95 percentage points, close to the 3.07 in mid-March that marked the widest margin since 1987, and beating the 2.96 in late December 2008 that was the biggest spread of the Great Recession, comparing Freddie Mac’s weekly rate average with 10-year Treasury data from the Federal Reserve.

“We are already seeing the impacts of brinksmanship,” Yellen said. “The U.S. economy hangs in the balance.”

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Kathleen Howley, Senior Contributor

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May 16, 2023
If The Debt Ceiling Isn’t Raised, Higher Mortgage Rates Will Hurt Home Sales

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U.S. debt default would cause borrowing costs to jump.

getty

A default on the nation’s debt, if Congress is unable to raise the federal debt ceiling in coming weeks, would boost mortgage rates by at least two percentage points and cause a slump in home sales as costlier financing puts real estate beyond the reach of more Americans, according to Jeff Tucker, a Zillow senior economist.

While it’s still unlikely the federal government will fail to pay its bills, the chances have increased in recent weeks because of an ongoing stalemate in Congress, Moody’s Analytics said last week. The chance of a debt default now stands at 10%, up from a previous estimate of 5%, the research firm said.

“Any major disruption to the economy and debt markets will have major repercussions for the housing market, chilling sales and raising borrowing costs, just when the market was beginning to stabilize and recover from the major cooldown of late 2022,” said Zillow’s Tucker.

The average U.S. rate for a 30-year fixed home loan likely would rise to 8.4% in coming months, he said, from last week’s 6.35%, as measured by Freddie Mac. That increase in borrowing costs would cause home sales to slump by 23%, while the U.S. unemployment rate likely would balloon to 8.3% from last month’s 3.4% as the economy entered a recession, Tucker said.

It would be a “self-inflicted disaster,” Tucker said.

Jaret Seiberg, the housing policy analyst for Cowen Washington Research Group, views Tucker’s estimates as possibly too conservative.

“Our view is that the Zillow report may be a best-case scenario as our concern is that credit markets will freeze up if there is a default,” Seiberg said.

Comments made by former President Donald Trump during a CNN “Town Hall” last week increased the chances of a debt disaster, Seiberg said. Trump told CNN’s Kaitlan Collins a debt default “could be nothing” and might be just “a bad week or a bad day.”

That stands in stark contrast to remarks he made while he was in the White House. On July 19, 2019, Trump described the nation’s obligation to pay its bills as “a very, very sacred thing in our country” and added, “I can’t imagine anybody ever even thinking of using the debt ceiling as a negotiating wedge.”

With a razor-thin Republican majority in the House of Representatives, even a few hold-outs inspired by Trump’s remarks could doom a chance to come to an agreement about raising the debt cap, Seiberg said. Negotiations over the debt ceiling aren’t about how much to spend – they’re about paying bills already incurred.

“We continue to view a default as unlikely, but that is premised on our belief that politicians realize how dangerous a default would be for the economy,” Seiberg said. “The problem is that unlike in prior fights, not every political leader agrees, as we heard this week from former President Donald Trump. It is why we cannot rule out a default.”

While economists agree that a failure of the U.S. government to pay its bills would be a recession-inducing catastrophe, they don’t agree on the “X date,” meaning the day a default would begin. Treasury Secretary Janet Yellen puts the month as June, and the earliest potential day as June 1. The U.S. Treasury said in January it would use “extraordinary measures” to move money around to delay a default as long as possible.

Goldman Sachs economists estimate the U.S. “will likely exhaust its cash and borrowing capacity by late July.” Zillow puts the default date as “almost certainly by August, depending on the flow of income tax receipts this spring.”

“It is impossible to predict with certainty the exact date when Treasury will be unable to pay all of the government’s bills,” Yellen told the Independent Community Bankers of America on Tuesday. “Every single day that Congress does not act, we are experiencing increased economic costs that could slow down the U.S. economy.”

The mortgage market is already showing signs of investor fear. Last month, the spread between 30-year fixed mortgage rates and 10-year Treasury yields reached the widest in almost 40 years. When spreads are wide, the mortgage rates that track the 10-year Treasury yield are higher than they normally would be as investors demand a risk premium.

In May’s first week, the spread was 2.95 percentage points, close to the 3.07 in mid-March that marked the widest margin since 1987, and beating the 2.96 in late December 2008 that was the biggest spread of the Great Recession, comparing Freddie Mac’s weekly rate average with 10-year Treasury data from the Federal Reserve.

“We are already seeing the impacts of brinksmanship,” Yellen said. “The U.S. economy hangs in the balance.”

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Kathleen Howley, Senior Contributor

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May 16, 2023
Nobody Wants To Buy The Ugly Crypto House

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Good evening, savvy property investors and interested home-buyers. Have you ever dreamed of a move to Hollywood, but were put off by a million-dollar pricetag? Well have I got the deal for you.

For sale is this four-bedroom, three-bathroom family home, located just minutes from the North Hollywood shopping centre, surrounded by “an array of shops, dining and entertainment options”. The property has been “recently updated”, with vaulted ceilings and a “kitchen [that] flows seamlessly into the living and dining areas with a wide and spacious open floor plan”.

Normally a house like that, in a location like this, would sell for well over one million dollars, but this is no normal house. This is the CRYPTO HOUSE, and for very obvious reasons, nobody wants to buy it.

Originally listed in October 2022 for $1.2 million, a complete lack of interest in the property has seen its asking price plummet to just $949,000 in just a matter of weeks. It’s not just buyers who are shunning the house, either; it’s listed on AirBnB as well, with a vacancy rate of…100%. Whenever you want the place, it’s available, because nobody wants to stay there in the short term either.

Here is how agents describe the house on property site Zillow:

Incredible opportunity for first-time home buyers, developers, and/or investors. A contemporary 4 bedroom 3 bath home featuring a bonus structure, pool, and spacious outdoor area, perfect for entertaining and relaxing. Situated on a quiet street in a highly desirable pocket of North Hollywood, the home has been recently updated to compliment the large windows and skylights throughout. The primary bedroom features vaulted ceilings while the kitchen flows seamlessly into the living and dining areas with a wide and spacious open floor plan. The bonus structure / 4th bedroom can be converted into an ADU for supplemental income. Ideal family home or income property for savvy investors, this property is primed for the right buyer. Conveniently located near the North Hollywood shopping center, with an array of shops, dining and entertainment options.

What they’re not mentioning is the fact the house is packed with crypto and NFT stuff splashed across almost every wall, from Bored Ape wallpaper to a bedroom covered in the Doge face. There is even, right next to the kitchen, a huge neon sign that lights up to display the words “Crypto House”.

There is also a room with prints of tweets all over the walls, and another themed entirely around Bitcoin logos. Oh, and a fireplace that is…metallic purple?

This video by devlytle does a great job of taking us room-by-room:

A quick look at the property’s sales history shows that it sold in 2016 for $520,000, then in September 2021—presumably to the current owners, who have been renting it out as a “content space”—for $960,000, which was weirdly way over the $885,000 asking price from just a month earlier.

Absolutely not.

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Luke Plunkett

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January 15, 2023
Zillow Picks Charlotte, North Carolina As 2023’s Hottest Housing Market

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Home value growth in Charlotte, North Carolina is expected to be much slower this year.

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Charlotte, North Carolina will be this year’s hottest housing market, according to a Zillow analysis. Cleveland, Pittsburgh, Dallas and Nashville join Charlotte in the top five of the Zillow 2023 hottest markets list.

“This year’s hottest markets will feel much chillier than they did a year ago,” said Anushna Prakash, economic data analyst at Zillow. “The desire to move hasn’t changed, but both buyers and sellers are frozen in place by higher mortgage rates, slowing the housing market to a crawl.”

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“Markets that offer relative affordability and room to grow are poised to stand out, especially given the prevalence of remote work,” said Prakash. “The good news for buyers is that monthly housing costs have stopped climbing. Home shoppers who can overcome affordability hurdles will find a more comfortable market this year, with more time to consider options and less chance of a bidding war, even if they’re shopping in one of the hottest markets.”

Zillow’s 10 hottest housing markets of 2023 in ranking order are Charlotte, North Carolina; Cleveland; Pittsburgh; Dallas; Nashville; Jacksonville, Florida; Kansas City, Kansas; Miami; Atlanta and Philadelphia.

Unlike in recent years, fast-growing home values are not a requirement for making this year’s list of hottest markets. Higher mortgage rates and severe affordability challenges have chilled demand and brought home values down from last summer’s peak. Home value growth in Charlotte is expected to be much slower this year than its 11.8% pace of 2022, as is the case in all of Zillow’s 2023 hottest markets and the U.S. as a whole.

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Charlotte ranks second among large markets in projections for both home value growth and growth in owner-occupied households, which helped shoot it to the top of this year’s hottest markets list. Both Cleveland and Pittsburgh ranked high in projections for time on market and new jobs per new home built.

There are only four holdovers from last year’s top 10, an indicator of how much the housing market has changed in just one year. Last year’s hottest market, Tampa, just missed the cut this year, coming in at 11. Austin, 2021’s hottest market, has fallen all the way to 29th on the list, in large part because it now ranks among the country’s most expensive large markets. San Jose, Sacramento, Minneapolis–St. Paul, Denver and San Francisco make up the five coolest large markets in Zillow’s 2023 projections.

While affordability remains a major hurdle, the good news for home buyers is that the cost of a typical mortgage fell in November, thanks to lower mortgage rates. Zillow economists expect affordability to stabilize in 2023, if not improve, making it easier for households to budget and plan for their housing decisions. For those able to buy now, less competition from other buyers means homes are staying on the market longer, many sellers are cutting their list price, and there is less chance of being caught in a bidding war.

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Brenda Richardson, Senior Contributor

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January 12, 2023
The Home Improvement Projects Spring Sellers Should Tackle Now (And What To Skip)

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The top projects that recent sellers say helped sell their homes were a fresh coat of paint and … [+] landscaping.

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Sellers gearing up for the spring home shopping season need to roll up their sleeves now and spruce up their homes if they want to attract a shrinking pool of buyers. Investing in improvements, maintenance and repairs could pay off when it’s time to sell.

New research commissioned by Zillow and conducted by The Harris Poll finds a majority of recent sellers (65%) take on at least two home improvement projects to prepare their home for sale, while Thumbtack data finds they can invest about $5,400 on average when hiring a professional to complete the most common projects.

The survey finds that sellers who sold their home within the past two years most commonly completed interior painting (40% did this), carpet cleaning (35%) and landscaping (33%) before listing their home for sale.

Data from Thumbtack shows the average cost of those projects adds up to $5,388, but can average as much as $8,249 in metro areas like Seattle-Tacoma and as little as $4,102 in metro areas like Miami–Fort Lauderdale. In addition to location, costs for these home improvements can vary based on the size and scope of the project. For instance, smaller landscaping projects, such as flower planting, lawn upkeep and shrub trimming, can cost several hundred dollars, while larger projects involving tree planting and sprinkler installation can cost thousands.

“These projects can instantly boost a home’s online curb appeal,” said Amanda Pendleton, Zillow’s home trends expert. “An inviting outdoor space, clean floors and a fresh coat of paint — particularly in the right color — can deliver a powerful signal to potential buyers that a home is well-maintained and contemporary. While sellers may be reluctant to shell out for these projects up front, those improvements can ultimately pay off, either by helping a home sell faster or for more money.”

Nearly 3 in 4 recent sellers (74%) believe the improvement projects they completed to prepare their home for sale helped their home sell. The top projects that recent sellers say helped sell their homes were interior painting (27%) and landscaping (21%).

“A well-maintained home is one of the best ways for homeowners to attract buyers,” said David Steckel, home expert at Thumbtack. “Thumbtack research finds a well-maintained home can sell for about 10% more than a similar home in average condition. Buyers are making life’s biggest investment, and they want the peace of mind that they’re investing in a home that was well cared for.”

When considering which projects to skip, only 11% of recent sellers thought appliance repair or replacement, and roof repair, maintenance or cleaning helped sell their home. Meanwhile, fewer than one in five of recent sellers (17%) believe completing a kitchen renovation to prepare their home for sale helped sell it. While costs vary depending on the work done and materials chosen, this project can average $10,355.

Neglecting needed repairs and minor cosmetic updates can lead to seller regret, particularly in today’s shifting market. The Zillow survey found that 30% of recent sellers think more home improvements or repairs would have helped them get a higher sale price. Separate Zillow research finds that about two in three real estate agents believe today’s sellers are mistaken if they think they don’t need to make home improvements before selling.

Late April is traditionally the best time to list a home for sale, which means now is the time to get a jump on any repairs or improvements. Previous Zillow research found that the top seller’s regret is that they didn’t start the process of preparing their home for sale sooner. And one-quarter of sellers who made at least one home improvement before listing their home for sale say it took longer than expected.

Today’s housing market is far different than the frenzied pandemic era of bidding wars and record-fast sales. A recent Zillow analysis finds that homes are now lingering on the market for a median of 54 days, 45% longer than last year. However, the listings that are finding buyers are doing so in 18 days nationwide, suggesting the most appealing homes are still moving very quickly. Real estate agents can help sellers decide which projects are worth the investment based on the market in their neighborhood.

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Brenda Richardson, Senior Contributor

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December 8, 2022
Forget Black Friday: The Best Day For Home Price Cuts Is Thursday

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This fall, a record 28% of home sellers have cut their list price.

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The stress of home buying can be all-consuming, but it doesn’t have to be. With the holiday season in full swing, home buyers looking for a Black Friday deal might want to shop on Thursdays. That’s the day of the week when sellers are most likely to slash their list price, according to new research from Zillow. This fall, a record 28% of sellers had cut their list price, meaning bargain hunters who can afford today’s mortgage rates are more likely to snag a discount.

When sellers cut prices, 18.5% of them do so on a Thursday. However, the timing can be slightly different depending on the metro area. For instance, in Philadelphia and Baltimore, price cuts most often happen on Tuesday, while Monday is the best day for deals in Detroit, Cleveland and Buffalo, New York. Buyers nationwide can be sure to see fewer price cuts on Fridays and the weekends when sellers are busy with showings and open houses.

The best time of year for bargains typically runs from the beginning of July to the middle of September. These are often discounts on homes that didn’t find a buyer during the busy spring and summer home shopping seasons. As homes linger on the market past October, it becomes increasingly less likely that their prices will come down.

“Fall and early-winter sellers likely understand the market is slower during the colder months and may have built that into their pricing strategy, resulting in fewer price cuts,” said Zillow senior economist Orphe Divounguy. “This year may be the exception. This fall, a record number of sellers have already adjusted their list price to keep up with the rapidly shifting market. The price they set just weeks ago may no longer be attainable in light of rising mortgage rates and falling demand.”

Buyers shouldn’t hold their breath for doorbuster discounts. Price drops are typically modest — between 2.6% and 3.8% off the home’s listing price. That adds up to about $11,000 on a typical U.S. home but can be as much as $61,700 in more expensive metro areas like San Jose, California. Shoppers in Buffalo can get the biggest bargains right now, where the typical price cut is 4.6%. Shoppers in Phoenix, meanwhile, are seeing the smallest reductions, with a typical price cut of 2.5%.

If a seller is going to cut the home’s price, it usually happens three weeks after listing. The exception is in the winter, when homes are typically listed for roughly seven weeks before sellers cut prices. Price reductions are now happening sooner than they used to prior to the pandemic, when listings would typically linger for four weeks before a price reduction.

Bargain hunters have more opportunity to snag a discount in today’s housing market than they have had in years. The share of listings with a price cut has been steadily rising as homes remain on the market 45% longer than a year ago. In most markets, cooling demand means buyers also have less competition and more bargaining power to negotiate with sellers. Most agents say buyers are making offers below list price more often than they were just six months ago.

“Buyers who are pre-approved for a mortgage at today’s rates will not only find more discounts, but they’ll have a much better buying experience,” said Divounguy. “They will have more time to make a decision and will be able to include contingencies in their offer, which could help them avoid a costly mistake. A home should be a long-term investment, and buyers today have a better opportunity to land the right home than they have had in several years. ”

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Brenda Richardson, Senior Contributor

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November 16, 2022