BY KENNETH R. HARNEY
You might be relaxing at the beach or in the mountains, but if you’re considering purchasing a home in the coming months, you should be aware of an important shift emerging in the market: List prices on growing numbers of houses are being cut, even in places where previous appreciation has been strong and sales at record levels. The great American post-recession housing-price boom appears to be losing at least a little of its ooomph, opening opportunities for alert buyers.
New research released last week by realty marketing site Zillow found that one of every seven listings (14 percent) across the country saw a price reduction during June, the latest month covered by the study data. The rate of reductions was higher than it’s been in some markets for years. In Seattle, which has been scorching hot — with multiple offers and double-digit appreciation routine — 12 percent of listings got a price reduction in June, the highest rate since 2014. The median cut was 3.1 percent.
Some of the largest cities and their suburbs are also seeing growing numbers of price adjustments:
- Nearly one of every five listings in Chicago saw a price cut averaging 2.7 percent in the survey.
- In the Washington, D.C., metro area, 15.4 percent of all listings had price reductions that averaged 2.5 percent.
- In Miami-Fort Lauderdale, the average decrease was 2.9 percent; metropolitan New York, 3.6 percent; Boston, 3 percent; San Francisco, 4.2 percent; San Diego, 2.3 percent; Charlotte, North Carolina, 2.4 percent; and Columbus, Ohio, 2.7 percent.
In San Diego, one of every five listings got pared back in June, a significantly higher rate than had occurred the year before, when one of every eight listings (12 percent) was reduced in price.
Of special note here: Reductions are occurring most frequently at the upper end of the price spectrum, where the average share of listings with cuts jumped to 16.2 percent. Lower-priced homes actually have seen a small decrease in the percentage of listings with reductions. Overall, according to Zillow, home-price appreciation is slowing in nearly half of the country’s 35 largest metropolitan markets.
Zillow’s study dovetailed with new research by realty brokerage Redfin, which found slowdowns and price softness in the upper-end, luxury segments — the top 5 percent most expensive homes — of some cities and suburbs. In Boston, luxury sales prices slumped by 16.7 percent year-over-year in the second quarter, compared with a 9.7 percent average increase in the non-luxury segment. Overall, however, luxury home prices increased nationwide by about 5.2 percent, down from 7.3 percent the previous quarter.
What’s going on? Multiple factors are at work. The recovery from the recession and housing bust has been underway since at least 2012. But every major up-cycle in home prices eventually runs out of fuel because buyers’ incomes can’t keep pace with price increases. Once buyers begin balking, sales start to soften — note that June saw existing home sales nationwide on the decline for the third straight month — and inventories of available properties slowly begin to accumulate. Inventories of listings at the entry-level price range generally remain low and continue to sell fast, sometimes with multiple offers. But upper-bracket listings tend to be relatively more available and sell more slowly. Sometimes it takes six to 12 months to sell them, according to Lawrence Yun, chief economist of the National Association of Realtors.
Jonathan Miller — a nationally known appraiser active in metropolitan New York, Philadelphia, Miami and Los Angeles — told me the pattern he sees almost everywhere is “soft at the top” tier of the price spectrum and “tighter as you move lower in price.” He advises potential buyers to keep a close eye on local sales statistics, because declining sales point to more price reductions in the future.
Here’s what could be another emerging trend, which turned up in the Redfin luxury sales study: Small but noticeable numbers of homeowners who live in high-cost, high-tax states such as New York and California appear to be fleeing to lower-tax markets. Some communities in Florida, Nevada and Washington are seeing unusually large price jumps in sales of upper bracket homes. Buyers aren’t reticent about their reasons either: Congress’ $10,000 cap on deductions of state and local property and incomes taxes. You might think local taxes are no big deal for well-off owners, but consider this: One house listed for $12 million in Massachusetts came with a $101,346 local real-estate tax bill.