By Aarthi Swaminathan
Nearly a third of home sellers are slashing prices in Sun Belt cities as spring home-buying season heats up.
According to February data from real-estate brokerage Zillow /zigman2/quotes/204413973/composite Z +1.68% , 33% of home listings in the Tampa, Fla., metro area saw a price cut in February, the highest share in the nation. That’s up 3.7% from a year ago.
Phoenix, Ariz., and San Antonio, Texas, followed with 32% and 27% of homes listed in those areas seeing price cuts.
The price cuts are the symptom of at least two factors: Homeowners are struggling to price their homes well, and there’s a surge in new listings, Orphe Divounguy, senior economist at Zillow, told MarketWatch.
“After a drought of activity in the housing market, nobody is quite sure how to price their home,” he explained. “Successful sellers are those who adopt [a home builder’s] strategy,” which is a combination of price cuts and concessions, Divounguy said.
Additionally, some markets have seen a big bump in newly built homes, particularly cities in the Sun Belt, such as in Texas and Florida, which is also affecting demand-and-supply dynamics, the economist said.
| Metro area | Share of listings with a price cut |
| Nationwide | 20.1% |
| Tampa | 32.8% |
| Phoenix | 32.1% |
| San Antonio | 27.0% |
| Jacksonville | 26.8% |
| Nashville | 26.5% |
Nationwide, one in five home listings is seeing a price cut, which is higher than normal for this time of the year, Zillow said. It’s also 2% higher than a year ago. “That’s happening because sellers who misjudged the market are cutting prices to close the gap with buyers,” Divounguy said.
And it is “really important to get the list price right in today’s housing market,” he added. “Competition is hot for attractive listings, while lackluster listings or listings priced too high are lingering on the market.”
The price cuts also serve as a balm for many Americans who have been priced out of buying homes as prices and mortgage rates stay elevated.
The 30-year mortgage is averaging near 7%, double where it was during the depths of the coronavirus pandemic. Home prices have marched upward over the past three years, as demand for homes exceeds supply.
Both of those factors have strained how much house buyers can afford, and are also “keeping some prospective homebuyers on the sidelines this spring,” Edward Seiler, associate vice president at the Mortgage Bankers Association, said in a statement.
To buy a median-priced home at about $413,000 in February, home buyers would need to earn an annual income of $114,000, according to recent analysis by Redfin /zigman2/quotes/203726414/composite RDFN +8.49% . The median household income in the U.S. is $84,000, according to Redfin.
“While that’s a sign of a major housing affordability crisis, it marks an improvement from October, when the typical household earned a record $40,810 less than it needed as mortgage rates hit the highest level in 23 years,” Redfin’s report said.
The median monthly mortgage payment, based on mortgage applications submitted by home buyers, was $2,184 in January, up 6% from a year ago, according to the Mortgage Bankers Association.
But “the eventual, expected decline in rates in the coming months will hopefully spur new activity in the housing market,” Seiler said.
At the same time, some parts of the market are heating up as eager buyers anticipate mortgage rates to fall and borrowing costs to ease. “A lot of people want to get in now before prices go up more,” Rachel Riva, a Miami-based Redfin agent, said in a statement .
“All of my recent listings have gone under contract in under 10 days, and most of them have received multiple offers,” she said.
How have home prices affected your life and how you think about the U.S. economy? Let us know at readerstories@marketwatch.com. One of our reporters might reach out to you to learn more.
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