The Share of Homes for Sale With Price Cuts Hit a 6-Year High
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Homebuyers accustomed to seeing prices going higher and higher are finally getting some relief. The share of home listings with price cuts climbed to a six-year high last month, likely due to weaker demand as a result of high mortgage rates.
In April, 22.4% of home listings had price cuts, a 1.9 percentage point jump from a month prior and an increase from 17.2% in April 2023, according to a new Zillow report.
It’s unusual for so many home sellers to cut their listing prices at this time of year when the housing market is often in overdrive, Skylar Olsen, chief economist at Zillow, said in the report.
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View RatesThe increase in price cuts comes as sellers have been entering the market at a faster rate than buyers so far this spring homebuying season.
The inventory of homes for sale is still about 36% lower than the pre-pandemic level, but the number of active listings increased 6.4% in April compared to the previous month, according to Zillow’s data.
Meanwhile, mortgage rates surged past 7% in mid-April for the first time in 2024 after inflation data came in hotter than expected, causing buyers to sit back and wait for better financing opportunities.
“The market coasted off of the speed built up in the first three months of the year. Home values continued to grow, but more slowly than the seasonal norm, and the speed of sales fell behind last year’s pace,” Olsen said.
Home values remain high
Unfortunately for buyers, despite a larger share of listings with price cuts, home values are at a record high. Based on Zillow’s index that estimates what existing homes are worth, the typical home value was $359,000 in April. That's a 4.4% increase from level a year ago of $344,000.
Because mortgage rates have soared, the typical monthly payment of $1,908 is up even more in the past year: 11.6%.
Olsen says recent price cuts from sellers could be a sign of “softer price growth ahead” amid weaker demand. However, there's an alternative explanation, which is that the increase in price cuts is more related to sellers going through a “feeling out process." Sellers may be adjusting prices more frequently because it's a complicated real estate environment and some owners have simply initially listed at an unrealistically high asking price.
"The latter scenario becomes more likely in a rapidly changing market like we see today, with relatively few recent sales to compare against,” Olsen said.
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