A residential neighborhood in San Marcos, Texas, US, on Sunday, May 22, 2022. (Photographer: Jordan Vonderhaar/Bloomberg via Getty Images)
The weather may be warm in the Sun Belt, but that’s not helping the cooling real estate market in some of the region’s largest cities.
A new Realtor.com report looked into how often sellers are reducing the asking price of their homes and one trend quickly jumped out.
Big picture view:
Three southern states – Arizona, Florida, and Texas – utterly dominated a list of metropolitan areas where sellers are most likely to see reductions.
"What jumps out is how geographically concentrated these markets are: three in Florida, three in Texas, and two in Arizona," says Jake Krimmel, senior economist at Realtor.com.
Of the nine regions where at least one in five homes saw price reductions last month, the only one not in those three states was Portland-Vancouver-Hillsboro metropolitan area, in Oregon and southern Washington.
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By the numbers:
Sellers in and around Arizona’s largest metropolitan area were most likely to cut prices in February, the survey found. More than a quarter of homes in the Phoenix-Mesa-Chandler market had their asking price lowered last month, far and away the highest percentage in the report.
Where house prices are going down most often
Realtor.com’s full list of metropolitan areas that saw price cuts on more than 20% of available homes in February:
- 28.4% - Phoenix-Mesa-Chandler, Arizona
- 24.8% - Tampa-St. Petersburg, Clearwater, Florida
- 22.6% - San Antonio-New Braunfels, Texas
- 21.8% - Tucson, Arizona
- 21.8% - Portland-Vancouver (WA)-Hillsboro, Oregon
- 21.1% - Jacksonville, Florida
- 21% - Dallas-Fort Worth-Arlington, Texas
- 20.7% - Orlando-Kissimmee-Sanford, Florida
- 20% - Austin-Round Rock-San Marcos, Texas
What they're saying:
Florida real estate agent and investor Ron Myers echoed the report’s finding that the Jacksonville, Tampa, and Orlando areas are being hit particularly hard. He explained to Realtor.com that the falling prices can be traced back to the pandemic, when prices in the Sunshine State surged.
"Many sellers are still stuck on [COVID-19] pandemic pricing, but buyers are no longer willing or able to pay those numbers," he said. "Higher interest rates, rising insurance costs, taxes, and HOA fees have made buyers much more careful."
Austin Portfolio Real Estate’s Samantha Midler also sees the effects of the pandemic on the need for price cuts.
"In Austin, we have been all over the news as the No. 1 major metro to have prices go down, but it is simply because we had the most drastic spike during the pandemic," Midler told Realtor.com. "Texas had looser restrictions and wide open spaces, so everyone and their mother moved here. It was an artificial demand that was crazy and unsustainable."
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Noting the "dramatic price cuts" in his home state, Arizona real estate agent James Sanson told the website he believed many of these sellers are winter visitors who had come to Arizona for the last time and feel it is time to move on.
"They believe they are playing with house money from the COVID spike, and what goes up must come back into alignment," he said. "They want to get in front of the quarter rolling down the hill and catch it, rather than chasing it down to the valley."
A "For Sale" sign outside a home in Phoenix, Arizona, U.S., on Sunday, April 25, 2021. (Courtney Pedroza/Bloomberg via Getty Images)
What's next:
Even with so many homes in these regions having their asking prices reduced, the overall number of cuts across the country compared to the same time last year is down slightly.
However, Krimmel described that drop as the result of an even larger trend. He explained that the market is starting to tilt toward buyers and said this year’s sellers are setting more realistic expectations.
"We are seeing list prices down in our monthly and weekly data," he said. "In fact, median list prices in our weekly data have been down by 2% or greater year over year for eight straight weeks now."
By recognizing the softer market going in, he added, sellers may end up listing their homes at a lower price initially and not need to cut it later.
The Source: Information from Realtor.com was used in this story. This story was reported from Orlando.