It’s a little early for annual look-backs, but 2013 will probably be recognized as the year of the buying frenzy… until it wasn’t. Nearly every month, headlines reported home prices hitting or surpassing five-year highs, and fierce bidding wars made some sellers question whether they should have listed their home for an even higher price. But increasingly, market indicators suggest that sellers are losing control of the market. As found in our fall market survey, sellers are increasingly disappointed in buyer interest. Perhaps the clearest sign is the growing prevalence of sellers reducing the prices of homes after listing. In February of this year, only one in seven sellers reduced their listing price. In September, it’s one in four.
The 2013 trend is especially striking when compared with 2011 and 2012, both of which saw relatively stable rates of price drops throughout the year. While people assume that price drops exhibit a seasonal pattern where sellers lower prices on the older inventory heading into the fall, Redfin did not see that pattern in 2011 and 2012. Price drops are usually a sign sellers didn’t get the offers they hoped for when they originally listed or they simply didn’t assess the current market conditions adequately. It’s no surprise that our number one home selling tip is pricing your home right the first time.
Price reductions were highest in Atlanta where 42 percent of homes for sale had a price reduction in September 2013. Sacramento, Phoenix, San Diego and Seattle all had price reductions of more than 30 percent of homes for sale. Reductions were less common in Texas, with San Antonio and Houston having price drops on just 22 percent of homes for sale. Other areas of the East Coast also saw lower rates of price drops with Long Island, Raleigh, NC, and Philadelphia seeing below average rates.
Seattle came in at number four on cities with the most price reductions. Local Redfin real estate agent Collin Horn helped one of his clients seize on a price drop opportunity in Seattle’s Madison Valley neighborhood. When he first took the buyers on a tour of the home, they felt it was overpriced. However, the very next day after the tour, the buyers received a Redfin Instant Update about this $459,000 3-bedroom, 2.25-bath townhome. They were alerted about a significant price drop on the home and they were ready to make an offer. Here’s what Collin had to say:
Just outside of the top five, Washington, D.C. home prices were reduced on 28 percent of listings in September. According to Redfin real estate agent Karen Parnes, “While it remains a seller’s market overall, things are changing. Some buyers are low-balling offers and succeeding. Recently, several of my clients had offers accepted that were 6 or 7 percent below asking price.”
Although some cities did exhibit lower rates of price reductions, every single metro area is seeing more in September 2013 compared to September 2012. Sacramento, Las Vegas, and Atlanta all have had double-digit year-over-year increases in the rate of price drops.
The latest data reveals that, for the first time in seven months, price drops became less common in October, with price drops occurring on only 24 percent of active listings. This marks a clear end to the seven-month rise in price drops. As home prices are now increasing at a less dramatic rate, sellers and agents are better able to price homes accurately without having to make adjustments later. We also expect price drops to be less common heading into the fall and winter months as home sellers tend to be in less of a rush at this time of year. And if you’re looking for the data behind this report and and the above graphics, download the data here.
