Home Price Cuts Increase as Inventory Rises

Realtor.com^® on Wednesday announced the findings of its August housing trend report which revealed a surge in price cuts and the second largest drop in the U.S. median list price in three years. Although competition between buyers remained stiff and list prices continue to rise, the report also revealed a slowdown in price growth and easing of inventory declines.

“Buyers, exhausted by bidding wars and little choice in inventory, could finally catch a break,” said Danielle Hale, chief economist for realtor.com^®. “An increase in price cuts suggests that sellers are starting to become more flexible, especially in pricey markets. However, affordability is a concern in most areas which continue to be sellers’ markets. Fierce competition and low inventory continue to push up prices. While buyers are gaining leverage in some markets, we are still far from a true ‘buyer’s market.'”

The median listing price in the U.S. decreased by $4,000 in August, dropping to $295,000 from a record-high of $299,000 in July. This is the second largest monthly list price drop since August 2015. While prices are still 7% higher than they were one year ago, the year-over-year increase is smaller than the 10% year-over-year gain seen last August.

The deceleration in price growth was also observed in the larger markets. The average yearly growth in median list prices in the largest 45 markets combined was 6%, down from 8% this time last year.

Meanwhile, price cuts are on the rise, especially in pricey markets where inventory is rising. The proportion of listings that feature price cuts rose 1.5 percentage points in the last year to 19.1% in August. The share of price cuts among listings is now 1.5 times more prevalent than in August 2012 when 13% of listings featured price discounts. This upward movement was more pronounced in major metropolitan areas in the last year including: Seattle with an 8% increase in cuts; San Jose with a 7% increase; and a 5% increase in San Diego, Riverside, Indianapolis and Los Angeles. In fact, 39 of the 45 largest markets saw an increase in the share of price cuts over last year.

The rate of inventory decline slowed, with only 2% fewer for-sale listings on the market than there were in August 2017. Inventory increased 2% over July, in line with the typical seasonal increase. The trend continues to gain strength as the last week of August saw the first year-over-year increase in inventory in four years. Approximately 488,000 new listings entered the market during August. San Jose, Seattle and San Diego were the three markets with the biggest inventory jumps over last year, all posting increases of 28% or more.

Price Gains and Price Cuts in Largest 45 U.S. Metros*