Listing Price Reductions are Becoming Common, Especially at The High End
By Aaron Terrazas @ Zillow Research
September 14, 2018

The share of pricier homes available for sale at a discount from their original list price is growing, even as sellers of less-expensive homes seem somewhat less willing to consider a price cut.

In June, 14.2 percent of all U.S. homes listed for sale on Zillow had at least one price cut, up slightly from 13.4 percent in June 2017, but more or less within the roughly 12 to 14 percent range in which the data have hovered since mid-2013. Still, price cuts could be increasingly more common in coming months if more recent trends continue to hold. Since the beginning of the year, the share of listings nationwide with a price cut increased 1.2 percentage points, the greatest January-to-June increase ever reported, and more than double the January-to-June increase last year.

Key Takeaways

  • About 14 percent of all listings across the U.S. had a price cut in June 2018, up from a recent low of 11.7 percent near the end of 2016.
  • U.S. home values rose 8.3 percent over the past year, and Zillow expects home value growth to slow to a 6.6 percent appreciation rate by this time next year.
  • Home value growth is slowing in almost half of the 35 largest U.S. metros, with Sacramento and Seattle reporting the greatest slowdown since the beginning of the year.
  • In San Diego, 20 percent of listings had a price cut in June, up from 12 percent a year ago.

And as home value growth begins to show signs of slowing in a number of large markets, the local price cut phenomenon is more pronounced. In two-thirds of the nation’s 35 largest housing markets, the overall share of listings with at least one price cut has risen over the past year.

In San Diego, 20 percent of all listings had a price cut in June 2018, up from 12 percent a year ago. In Seattle, 12 percent of all listings had a price cut in June, the greatest share since October 2014. Portland, Sacramento, Calif. and Riverside, Calif., were also among the markets that experienced an increase in the share of listings with a price cut in June compared to a year ago.

And the overall increase in the share of homes with a price cut appears to be driven by trends in the upper reaches of the market. Since the beginning of the year, the share of higher-priced listings with a price cut – those priced in the top one-third of all homes listed for sale – rose 0.9 percentage points, to 16.2 percent. Over the same time, the share of lower-priced listings with a price cut (those priced in the bottom one-third of all homes) fell 0.1 percentage points, to 11.2 percent.

And the national trend holds in a number of notable local markets, as well. Since the beginning of the year, higher-priced listings have seen a disproportionately large increase in price cuts in 23 of the 35 largest metros analyzed by Zillow. And in June, a larger share of top-tier listings had at least one price cut than bottom-tier listings in all of the 35 largest markets.

Markets with the largest disparities between shares of listings in the top tier versus the bottom tier with a price cut in June included Dallas (21.9 percent in the top tier, 8.7 percent in the bottom tier, a 13.2 percentage point difference), Orlando (12.5 percentage points) and Houston (12.2 percentage points). Las Vegas, San Antonio, Charlotte, Phoenix and Columbus all had at least a 10 percentage point differential between the share of top-tier listings with a price cut and the share of bottom-tier listings with a price cut.

U.S. home values rose 8.3 percent over the past year to a median home value of $217,300. While home value growth isn’t slowing down nationally, it is slowing in some of the nation’s hottest housing markets. In almost half of the 35 largest markets, home value growth is appreciating more slowly now than at the beginning of the year. The median home value in Seattle rose 11.4 percent over the past year, but the annual growth rate was close to 14 percent at the beginning of the year.

There are fewer listings with a price cut in some of the nation’s more affordable housing markets. San Antonio, Phoenix, Philadelphia and Houston reported a smaller percentage of listings with a price cut in June than a year ago. In San Antonio, where the median home value is $185,000, 17.8 percent of all listings had a price cut in June, down from about 20 percent of listings a year ago.

Zillow forecasts home value growth across the U.S. to slow to a 6.6 percent annual appreciation rate over the next year. Among the 35 largest metros, home value growth in San Jose, Calif., Indianapolis and Charlotte, N.C. are forecasted to slow the most.

The housing market has tilted sharply in favor of sellers over the past two years, but there are very early signs that the winds may be starting to shift ever-so-slightly. It’s far too soon to call this a buyer’s market, but these data indicate the frenetic pace of the housing market over the past few years may be starting to return toward a more normal trend.