Price cutting of listed properties apparently has eased as real estate markets recover from the boom and bust of the tax credit. On an annual basis, price cutting declined slightly.
Trulia.com today announced that 22 percent of listings currently on the market in the United States as of June 1, 2010 experienced at least one price reduction, which is a slight decrease from 23.6 percent in June 2009. The total dollar amount slashed from home prices was $26.7 billion for the year and the average discount for price-reduced homes continued to hold at 10 percent off of the original listing price.
Price increases and price reductions fluctuated dramatically with the tax credit. In May, after the credit expired, Trulia reported that price cutting of homes listed on its site reached 22 percent of listings increased 10 percent over April.
In April, only 20 percent of current home listings have been reduced in price at least once, representing a 26 percent decline nationally from March. Median home prices rose 3.7 percent in April and 1.4 percent in March, according to NAR’s Existing Home Sales report.
“Sellers are optimistic heading into the summer season because of the strong sales figures from the spring. The spring sales were fueled by the expiration of the tax credit and my concern is that this heavy activity is providing sellers with a false state of optimism,” said Pete Flint, co-founder and CEO of Trulia. “We are already starting to see rising inventory levels and I believe this will be the story of the summer. For the unforeseen future, buyers will continue to have the negotiating power and I expect we will see sellers get aggressive via price cuts throughout the summer.”
Flint’s optimism is an about-face from his May 12 statement.
“With more than a year of the federal government’s involvement, we are now re-entering the free market system. As we readjust to the free market, we expect to hit turbulence in some markets. We won’t know the true severity of the tax credit expiration until the conclusion of the peak home buying season in the summer months. Only then will we have a better sense if the U.S. housing market can stand on its own two feet,” he said.
Meanwhile, new data continues to describe the severity of the market downturns following the end of the credit. A recent national survey of real estate agents by Credit Suisse shows that traffic at homes for sale fell in May to its lowest level since the financial crisis of late 2008. The decline from April to May was the biggest-one month fall since the survey started in January 2005.
ZipRealty found that owners on its site were cutting prices at a greater rage than Trulia. Four of ten owners changed listed prices in May for an average reduction of $19,240 (see Owners Slash Prices After Tax Credit).
Builders are certainly feeling the chill in new home sales, which close much faster than existing homes (see Will the Tax Credit Bump Create a Summer Slump?)
Trulia found that cities in the Western U.S. experienced the largest decreases in price reductions compared the previous year. Las Vegas, NV led the way with a 67 percent decrease and six California cities saw a decrease in price reductions of 24 percent or more, including Oakland, San Jose, Los Angeles, Sacramento, San Francisco and San Diego. The following U.S. cities experienced the biggest decreases in price reductions from June 1, 2009 to June 1, 2010.
On the other end of the spectrum, cities in the Midwest and South experienced some of the largest percentage increases in price reductions in year-over-year comparison. Kansas City, MO jumped 55 percent from June 2009 to June 2010, while other cities such as Arlington, TX, Cleveland, OH, Louisville, KY and Houston, TX all saw increases in price reductions of 30 percent or more. The following U.S. cities experienced the biggest increases in price reductions from June 1, 2009 to June 1, 2010.
For the second month in a row, Minneapolis, MN saw 40 percent of its listings reduced in price. No other city has reached this mark since Trulia started tracking home price reductions in April 2009. With an average discount for price-reduced homes at eight percent, the city’s total dollar amount slashed from home prices was $26.4 million.
Price reduction levels for luxury homes (those listed at $2 million and above) continue to hold steady with 21 percent of homes seeing a price reduction and with an average reduction of 14 percent. Homes in this category account for the less than 2 percent of total inventory but account for almost 25 percent of total dollars slashed off all the homes for sale.