Hot market home sellers drop prices as demand plummets

Markets / May 31, 2022 / DRPhillF / 0

Mike Midler, CEO of Century 21, argues that builders need to run “double time” to catch up with demand for millennials and Generation Z homebuyers.

Price drops are becoming “increasingly common” in some of the most popular housing markets across the United States.

According to new Redfin data, more than 20% of home sellers reduced their prices in seven of the 10 most popular immigration destinations last month: Cape Coral, Florida; Sacramento, California; Northport, Florida; Tampa, Florida; Atlanta, Georgia; San Antonio, Texas, and Phoenix, Arizona.

Although lower prices are becoming more common, it is a result of higher mortgage rates, which overprice buyers and lead to lower demand.

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Redfin chief economist Daryl Fairweather said in a statement. “The price of a home is driven by the balance of supply and demand, and when demand is low and supply increases as it is now, rapid price increases quickly evaporate.”

A sign in front of a house for sale in Pittsburgh, January 4, 2019. (AP Photo/Keith Srakocic, File/AP Newsroom)

Fairweather said areas that have experienced massive immigration and sharp home price increases over the past two years are now experiencing a “sudden drop in demand,” forcing sellers to “reduce their prices at an increasing pace.”

In April, 41% of home sellers fell in Boise, Idaho, which is a 10% increase over last year and the largest share of home sellers in Redfin’s analysis.

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Over the past two years, home prices in the area have risen 62%, according to Redfin.

Cape Coral, Florida, was not far behind, with the price of their homes dropping 33%, according to Redfin. In New Orleans and Baton Rouge, Louisiana, 32% and 31% of home sellers, respectively, lowered the price of their homes.

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The data also shows that 30% of Sacramento home sellers have decided to lower their prices.

“For home sellers in these markets, the sharp increase in mortgage rates has taken some wind out of the housing market that was heavily charged with increased immigration,” Redfin reported.

In fact, these mentioned sellers are “leading the national price drop to its highest level since October 2019,” according to Redfin.