For Some Sellers, Landlords, Price Cuts are the Answer
It seems almost counter-intuitive: with home prices steadily rising and inventories at near record lows, all a home seller has to do is put the home on the market and wait for the offers–and price wars–to come in, right?
Perhaps that holds true in some markets, such as red-hot northern Virginia, where many homes are receiving multiple offers within days of listing. But in other markets, said Trulia, San Francisco, many landlords and home sellers are cutting prices during this spring home shopping season,
A Trulia analysis of home sales and rental market listings found for both one in 10 listings included a price cut. The share of rent cuts for rental listings nationally increased 1.2 percentage points from May 2016 through April 2017 to 9.7% from 8.6% the prior year (May 2015 to April 2016). In the for-sale market, more than one in 10 for-sale listings had a price cut: The share of for-sale listings with price cuts nationally increased 0.5 percentage points to 10.9% from 10.4% during the year ending April from 10.4%. This compared to a 0.5 percentage-point increase six months ago.
“After five years of steep rent increases nationally, listing prices in the rental market are edging lower and more often landlords are cutting advertised rents,” said Felipe Chacón, a housing economist with Trulia’s Housing Economics Research Team and author of the report. “Meanwhile, for-sale price increases remain strong, but sellers are still cutting prices to move homes off the market and doing so at an accelerating rate. This suggests that if price cuts are predictive, home prices soon could flatten. On the other hand, accelerating home prices could just be making it more difficult for sellers to price their home right from the get-go.”
The report noted the pace of rent cuts is slowing. From February through April (8.2%) compared to the same three-month period in 2016 (7.7%), Chacón said the increase of 0.5 percentage points is not quite as dramatic as when looking at annual data, which could indicate that price-cut growth is stabilizing. He said a majority of big rental markets saw cuts increase: 83 of the top 100 metro areas saw the share of rental listings that had a price cut increase from last year to this year.
In contrast, price cuts rose sharply for for-sale homes, Chacón said. Annually, the share of for-sale listings rose steadily, but for the same period a year ago, price cuts increased by 1 percentage point, from 9.8% to 10.8%, suggesting a quickening movement toward more price cuts. Most major housing markets saw cuts increase: 69 of the 100 largest metros saw the share of for-sale listings with a price reduction increase from last year to this year.
The report said Dallas led metros with largest increases in proportion of for-sale listings with price reductions, followed by San Antonio, Texas, at No. 2; both saw a 3.0 percentage point increases.
“Price growth in Dallas–and San Antonio until recently–has been increasing at well above the national rate,” Chacón said. “This makes it a bit more difficult for sellers to accurately price their homes. Additionally, Texas is the largest nondisclosure state in the country. Having less information about how much other homes are selling for makes it more difficult to price your own home.”
The report said San Francisco fell to No. 5 from No. 1 six months ago with a 2.8 percentage point increase in price reductions on for-sale properties over the last year, but the proportion of price reductions remains low overall with only 8.6%, which is the third lowest out of the top 100 metros. Last year, only 5.8% of listings in San Francisco saw a price reduction, which was the lowest out of the largest 100 metros.
The report can be found at https://www.trulia.com/blog/trends/cut-rate-housing-spring-2017/.
