Homeowners in markets that boomed when the real estate industry was blazing hot during the COVID-19 pandemic are now being forced to cut prices amid dwindling demand, according to data released by Redfin on Monday.
In the US, 21% of home sellers cut their asking prices in July — the highest share since Redfin began tracking the stat in 2012, the company said. The share of homes with price decreases in July compared to a year ago increased in 94 of the 97 metropolitan areas surveyed.
The trend was at its worst in “pandemic home-buying boomtowns” such as Boise, Idaho, where a whopping 69.7% of homes for sale cut sales prices in July. Other overheated markets included Denver, with prices falling 58%, and Salt Lake City, with a 54.8% share of the austerity measures.
“Individual home sellers and builders were both quick to cut their prices early this summer, especially as they had unrealistic expectations of both price and timelines,” said Boise-based Redfin agent Shauna Pendleton.
“They overpriced because their neighbor’s house sold for an exorbitant price a few months ago, and expected to receive multiple offers the first weekend because they heard stories about it,” Pendleton added.
The US housing market has cooled significantly in recent months as the Federal Reserve tightens monetary policy to tackle rampant inflation. Mortgage interest rates have risen above 5%, almost twice as high as in January.
The spike in mortgage rates has exacerbated an affordability crisis for potential buyers battling the effects of inflation on their budgets and skyrocketing house prices. The trend has reduced demand and sellers have little choice but to lower their expectations.
Other metropolitan areas with more than a 50% share of home price cuts were Tacoma, Wash.; Tampa, Florida; Sacramento, California; Indianapolis and Phoenix, according to Redfin.
Overall, home sales fell 19.3% in July compared to a year earlier, Redfin data shows. Activity has reached its lowest point since the start of the COVID-19 pandemic. Sales have fallen for six consecutive months.
“Some potential home buyers were sidelined because they were priced out of the market; others were wary of potential declines in home values in the near future,” the company said in a press release.
As The Post reported, Ian Shepherdson, the chief economist at Pantheon Macroeconomics, said in a letter to customers last week that the market’s slump “is nowhere near bottoming, especially on prices.”
“The bottom is still a long way off, given how much demand has been crushed by rising rates; the required monthly mortgage payment for a new buyer of an existing single-family home is no longer increasing, but was still at 51% yoy in July,” Shepherdson said in a note to customers.
Credit rating agency Fitch also warned of an impending decline, predicting prices could eventually fall as much as 15% in the event of a major housing shortage.