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Real Estate Investing: 8 Cities That Have Seen Major House Price Cuts

 1 year ago
source link: https://www.businessinsider.com/real-estate-investing-housing-market-price-cuts-bubble-crash-slowdown-022-6
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Housing demand is softening in these 8 cities, according to Zillow. Some of them previously looked considerably overvalued.

Jun 29, 2022, 2:44 PM
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House prices are slowing across the US - and eight previously overvalued markets are experiencing price cuts, according to Zillow. Shutterstock

  • House prices are starting to slow across the US after years of steep rises.
  • Price cuts have occurred in the 50 largest housing markets in the country, according to Zillow.
  • Here are the eight cities that have seen their proportion of price cuts increase most.

US house prices are finally starting to drop and significant price cuts are occurring in some of the markets that surged the most during the pandemic, according to Zillow data obtained by Bloomberg.

The real-estate online marketplace and data portal found that the proportion of houses being listed below their initial asking price in the US's 50 largest markets increased from 8.2% to 11.5% over the past year.

Home prices soared across the US during the pandemic, which led some economists to warn that a housing bubble could be developing. But these price cuts could be a sign that the market is cooling off after two years of rapid growth.

A slight drop in house prices shouldn't necessarily be a cause for concern, a real-estate investing expert told Insider.

"Taking some froth out of this market is probably a good thing," UBS strategist Jonathan Woloshin said in a recent interview. "Basic economics shows that you can't have a situation where home prices continue to outpace wage growth so significantly."

Rising interest rates could be one factor contributing to price drops.

The Federal Reserve is hiking rates to try to tame inflation — which is currently at a four-decade high of 8.6%.

But rising rates mean monthly mortgage repayments go up, which makes buying a home less attractive and causes demand to fall.

Softening demand

Price cuts are happening in housing markets across the US.

And some of the housing markets that are experiencing the sharpest price drops looked like the bubbliest markets in the US a few months ago.

In February, the real-estate brokerage Redfin identified Nashville as the US's most overvalued housing market, with rich out-of-town homebuyers driving up prices.

"We're seeing a lot of out-of-state transplants, mostly from states like California that have an income tax ," Hope Geyer, a Redfin agent based in Nashville, said at the time. "People moving from the West Coast will pay way over asking price without batting an eye."

But prices in Nashville are now easing, according to Zillow. 12.5% of homes in the city saw price cuts in May 2022 — up 5.4 percentage points from a year earlier.

Austin is another housing market that previously looked overvalued — or by some measures, even bubbly — but is now seeing demand soften.

Prices surged across Texas during the pandemic as Americans migrated to the Sun Belt. But Zillow's data showed that 9.6% of Austin homes listed in May 2022 have seen price cuts — up from 4% this time last year.

"The market is pivoting," Central Texas housing consultant Eldon Rude told the Austin American-Statesman last month. He added that his clients "unanimously said that the housing market, and sales, have slowed."

Las Vegas, Phoenix, and Salt Lake City also all featured on Zillow's list of cities where demand is softening. In March, they were considered three of the US's 10 bubbliest markets.

Zillow found that the share of lower listing prices rose by five points or more in eight US cities in total. Here are the eight housing market where demand for housing seems to be softening most:


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