The housing market in recent years has been stuck in the same position. A limited supply of homes for sale has led to competitive bidding that pushed prices higher and higher. Prospective buyers trying to keep up with skyrocketing prices have at least had low interest rates on their side, not to mention an economy long since rebounded from the 2008 financial crisis.
But the market is changing. Because prices have risen faster than wages, the unaffordability of homes is taking a toll on sales. The threat of higher interest rates have also kept some prospective buyers out of the market. As a result, more homes are now on the market; they’re staying on the market for longer and price cuts are on the rise.
The first signs of change came in the summer of 2018, which one realtor Curbed spoke with dubbed “the most competitive housing market in recorded history.” But that prediction didn’t materialize. Instead, homes started lingering on the market and home sales dropped, setting the stage for potential price drops. This trend has been strongest in West Coast markets that have become some of the most expensive in the country, including San Jose, California, San Francisco, and Seattle.
March housing data from a variety of industry sources suggests the current trend is continuing, inching closer to prices possibly coming down. Some data show prices having already dropped.
The Census Bureau’s monthly data on new home sales shows a slight uptick in the number of sales, a result of a larger supply of homes on the market. But more importantly, the data shows the median sales price of new homes dropping year-over-year for the fifth consecutive month.
This suggests that home builders are cutting prices and finally adding inventory to the lower end of the price spectrum, which usually caters to first-time homebuyers and middle-income buyers.
This trend isn’t carrying over to existing home sales, however, according to March data from the National Association of Realtors. The median price of existing home sales has risen year-over-year by a steady clip of 4 percent. And while new home sales have ticked up modestly, existing home sales continue to drop year-over-year in almost every price range—including the low end.
The West Coast continues to see inventory pile up, according to Realtor.com’s March data , particularly in San Jose. Total active listings keeps skyrocketing, and homes that are on the market are staying there longer. Price cuts have spiked.
The number of price cuts to homes listed in March jumped by a whopping 275.9 percent year-over-year in San Jose, by far the highest in the country. Las Vegas, Seattle, San Francisco, and Salem, Oregon, also saw price cuts jump by triple-digit percentages in March.
Whether the inventory spikes and listings price cuts are leading to actual drops in sale prices on the West Coast is so far unclear, as there’s conflicting data.
The California Association of Realtors reported that three Southern California counties—Los Angeles, Orange, and San Diego—saw sales prices drop in March, although none by more than 2 percent. However, the most recent median sales price data from ATTOM Data Solutions, a leading real estate data provider, shows healthy sales price growth year-over-year in the metropolitan areas of those counties.