Close to one-fifth of homes for sale had list prices slashed in February, doubling the rate in the span of 12 months, according to new data from Realtor.com.
More than 18% of listings had price cuts in February compared to approximately 9% one year ago. The limits that rising interest rates and inflation have placed on home buyer affordability appeared to particularly impact sellers in Western Sun Belt cities, where prices surged the most between 2020 and early 2022. Smaller metropolitan areas in the Northeast and Midwest were less likely to see reductions in asking prices, Realtor.com said.
"A price reduction means the sellers are coming into the market optimistic, but the buyers aren't meeting them there," said Hannah Jones, economic research analyst at Realtor.com.
The rapid jump in mortgage rates over the past year — with the current benchmark 30-year up by more than 2% on an annual basis and over 3% higher than at the start of 2022 — have resulted in many hopeful buyers unable to afford homes at existing price levels. Those concerns helped drive the pace of price reductions upward in markets considered boomtowns just months ago, such as Austin, Texas, and Phoenix.
Also, in the past week, Redfin issued a new analysis similarly finding a concentration of housing markets in the West cooling the fastest in the last year, based on the difference in prices from final sale versus the original listing, in deals worked by its agents. Overlap at the top of Realtor.com's and Redfin's lists were common. with Austin and Phoenix high on both. But major technology centers, in addition to warmer Sun Belt cities, also figured prominently in Redfin's report, with Seattle and Denver both landing in the top five. Recent troubles roiling the technology industry is dampening demand.
According to new analysis from the Bank of America Institute, median mortgage payments nationally increased 7% year over year as well. But variations existed on a regional basis, with several Sun Belt metropolitan areas picking up the rate by more than 10%. Median payment amounts were determined based on a rolling six-month average.
"People across the United States continue to feel the squeeze from higher housing costs but the impact is uneven between regions," said Anna Zhou, economist for the Bank of America Institute.
Realtor.com's findings reflect a continuation of a trend that started gaining steam in spring 2022, when Redfin found approximately 20% of its listings had reductions compared with just a few weeks earlier. More recently, the digital real estate brokerage also noted the increased number of concessions currently offered to buyers, sometimes along with lower prices.
According to Realtor.com, the following five cities experienced some of the highest rates of price cuts among for-sale homes in February across the country.
