Top 15 cities with the biggest home price cuts
- A number of major metro stations are seeing even higher average price cuts for homes for sale.
- According to consultant Nicholas Girley, this trend predicts a downturn in the market and an increase in inventory.
- Using Gerli’s method, Insider has identified the 15 best US cities with property price corrections.
Rising fears of a possible housing collapse have kept real estate investors and regular homebuyers awake at night.
The US real estate market has become overheated in the past few years, as rising demand from first-time homebuyers and competition with investors constantly overwhelm the housing supply shortfall. Since the spring of 2020, median home prices have risen nearly 27%, according to data from the U.S. Census Bureau and the Department of Housing and Urban Development.
Remote workers migrating from major metropolitan areas to low-cost hot spots have been an additional fan of the fire, driving their incomes and savings to smaller markets and causing mini-bubbles in cities like Nashville, Atlanta, and Columbus, Ohio. As mortgage rates continue to rise, experts are increasingly wary of overvalued properties in other markets such as Boise, Ogden and Spokane.
Now, the question now is whether this momentum will continue or whether the US housing bubble will explode in a spectacular fashion. While the 2008 housing collapse, leading to the global financial crisis led to a major crisis
It is still fresh in the minds of many homeowners, and the general consensus is that the market is in a very different place today thanks to changes in lending practices and standards.
Nicholas Gurley, CEO of real estate data analytics firm Reventure Consulting, believes we may have seen the peak in bubble markets in particular and that asking prices may start to return to the ground.
In a recent YouTube video, Girly pointed to rising home prices on the market as a sign of overvaluation and/or buyer fatigue. Specifically, he spotlighted a home in Long Island, New York whose price was reduced by 8% to $972,000 from $1,054,000 just two weeks after it was put on the market — leaving it at a lower asking price than the property from 2017. And there are certainly many other sellers in that market that readjust prices to stay competitive.
“If sellers increase the amount they are reducing the price of their home, it is a sign that they are desperate and want to save the housing market before it collapses,” Girley explained in the video. “This is a trend that is occurring in certain markets, more than others, as one of the early warning signs of a housing collapse.”
That’s because historically, the rise in the average number of price cuts — and the higher the dollar amount in those price cuts — in a particular metro area indicates that that market is beginning to decline, Gerley said. For example, in Boise, ID, which he described as the “largest housing bubble in the US” closest to collapse, average price cuts have been on the rise, signaling a wave of sellers trying to empty their properties before the bubble bursts.
But the so-called “seller’s desperation,” as Girley points out, may stem from two causes.
First of all, sellers can simply try to list what is supposed to be the top of the market before the overly inflated housing market corrects itself. But the rush to cut prices may also be due to an influx of new inventory earlier this year, as the rising supply of homes pressures sellers to lower existing prices, ultimately improving market competitiveness.
Simultaneously, these factors may indicate that the overheated markets are finally calming enough to return to normal.
Jarley emphasized that “just because there is a significant increase in the value of the price cut and a significant increase in seller desperation in the market does not mean that it will experience a major collapse in the long run.” “It just means we’re seeing a softening in the short term.”
To truly predict a housing correction versus a crash, Girley advised analyzing fundamentals such as the area’s job growth versus its home-building rate, its three-year appreciation rate versus historical benchmarks, and the property’s value-to-earnings ratio, which informs affordability.
Using data from Zillow, Insider followed Gerli’s methodology to identify the top 15 US markets with the largest increases between March 2022 and March 2021 price cuts. New York leads the pool of potentially cold markets, which are listed below in descending order of average price cuts.
“[In these areas]It’s a good bet to see more inventory and more price cuts in the future, Jarley said.