An increasing share of home sellers are lowering their asking price as rapidly rising mortgage rates cut into buyers’ budgets and homebuying sentiment drops. Price drops are especially common in mid-sized metros in the West–particularly in Utah–many of which had outsized price growth during the pandemic because they were hotspots for people moving in from other parts of the country.
Nearly half (47.8%) of homes for sale in Provo, UT–located about 45 miles away from Salt Lake City–had a price drop in May, the highest share of the 108 metropolitan divisions in this analysis. Tacoma, WA, had about the same share of price cuts, at 47.7%. Next come Denver (46.9%), (Salt Lake City 45.8%) and Sacramento (44.3%). Boise, ID (44.2%), Ogden, UT (42.6%), Portland, OR (42%), Indianapolis, IN (41.9%) and Philadelphia (41.2%) round out the top 10.
Provo, Boise, Salt Lake City, Sacramento and Ogden were also the top five metros with the biggest increase in the share of listings with price drops from a year earlier. Roughly 12% of listings in Provo and Boise had a price drop in May 2021, and it was around 20% in Salt Lake City, Sacramento and Ogden.
All in all, about half (53) of the metros in this analysis saw more than 25% of home sellers drop their asking price in May. More than 10% of home sellers dropped their price in all 108 metros, driving the national share of price drops to a record high.
The uptick in price drops is symbolic of the slowdown in the housing market. Many buyers are backing off amid skyrocketing home prices, surging mortgage rates, high inflation and a faltering stock market.
“There are two kinds of sellers in today’s market: Those who already know the market has cooled, and those who are learning about the cooling market as they go through the selling process,” said Redfin Chief Economist Daryl Fairweather. “The former wants to sell quickly before the market slows further and they’re willing to price slightly below comparable homes in their neighborhood right away, and the latter may have to drop their price if their home doesn’t attract buyers within a few weeks. As more sellers come to terms with the slowing market, fewer homes will have price drops.”
Four of the 10 metros with the highest share of price drops–Provo, Salt Lake City, Boise and Ogden–are among the 10 places where prices increased most during the pandemic. Prices shot up 65.7% to $550,000 from May 2020 to May 2022 in Provo, They rose 56.2% to $556,000 in Salt Lake City, 66.7% in Boise to $550,000 and 57.2% to $500,000 in Ogden.
The soaring prices were largely due to out-of-town homebuyers moving in during the pandemic, competing with locals for a limited supply of homes. Migration into both Boise and the Salt Lake City metro area–which includes Provo and Ogden–nearly tripled throughout 2020. The trend has started to reverse in both places, with Salt Lake City seeing a net outflow (more Redfin.com users looking to leave than move in) for the first time on record in the first quarter.
“Many buyers are backing out of the market–and even backing out of deals–and some sellers are responding by dropping their price,” said Boise Redfin agent Shauna Pendleton. “Some buyers are no longer able to afford the home they want because mortgage rates have increased so much. There aren’t nearly as many people moving into the Boise area now that prices have gone through the roof. Ironically, a lot of Boise newcomers are now leaving because the quiet, slow-paced lifestyle that drew them here doesn’t exist the way it did before so many people moved in. Those people are cashing in on their equity to move to more affordable areas, mainly in the Midwest, where they can get more for their money–in some cases, they can even pay all cash.”
The share of homes with a price drop increased from a year earlier in 102 of the 108 metros in this analysis. It declined in six metros, three of them in Illinois: McAllen, TX, Elgin, IL, Chicago, Fresno, CA, Lake County, IL and Springfield, MA.
108 metropolitan divisions that are part of the 100 most populous U.S. metropolitan areas, sorted by share of for-sale listings with a price drop in May 2022
