Housing News

Homebuyers Take Note: More Price Cuts and Discounts Heading into the Spring Market

Homebuyers weary of the ongoing trifecta of high home prices, stubborn mortgage rates, and tight housing stock have something to celebrate as the spring market approaches.

The number of home sellers cutting prices hit a two-year high in January, according to the latest monthly housing report from Zillow.com. More homes are also now selling for less than the asking price. That’s great news for cost-conscious buyers.

Nearly a quarter of home sellers, 23%, slashed listing prices last month. That marked the highest share of reductions since January 2018, when the real estate site began tracking the metric.

Just how much did homebuyers save at the closing table? The typical home had 1.8% shaved off its asking price in January, according to recent Redfin data. That’s the largest price discount buyers have seen in two years.

It may also give buyers some ammunition to negotiate prices and potentially even closing costs and other concessions.

Why are home sellers cutting prices?

Many sellers are being forced to cut prices to secure a deal because there is more competition in the market. The number of new listings shot up 60.7% from December to January and rose 11.5% year-over-year, according to Zillow.

Meanwhile, many buyers are stretched financially by high prices and mortgage rates.

Sellers may be willing to negotiate prices due to current home equity near “record highs,” said Zillow’s Chief Economist Skylar Olsen in a statement.

As a result, “sellers are in a good position and are willing to make price cuts to close a deal,” added Olsen.

Since the COVID-19 pandemic, home values have risen a whopping 44%, according to Zillow. The typical home was valued at $356,776 in January.

The build-up of equity seems to be easing the mortgage “lock-in” effect that has kept so many owners handcuffed to the low mortgage interest rates they snagged in years past.

In a nutshell, the high home equity—and overall upswing in the economy—may be taking some of the financial sting out of sellers lowering a home’s asking price.

Where can homebuyers find bargains?

Bargain hunters looking for the best deals may want to consider heading West, according to Zillow’s data.

More than a third of home listings in Phoenix, 34%, boasted price cuts. Rounding out the top three metropolitan areas with the most price reductions were Tampa, Fla., 32%, and Jacksonville, Fla., 31%. Orlando, Fla. and Dallas both saw price reductions at 29%.

Denver was the metro that had the largest year-over-year increase in the share of listings with price cuts. It was followed by Denver; Las Vegas, San Diego; and Austin, Texas. This means buyers in these markets may be able to negotiate deals.

Some buyers are already paying attention to the bounty of price-reduced listings—and pouncing when they find the right property.

In January, homes went under contract in 38 days, according to Zillow data. That’s nine fewer days than a year prior but 10 days quicker than pre-pandemic times.