Half of Provo’s home sellers just lowered their asking price – these 19 real estate markets aren’t far behind

Even in a hot housing market, it’s common for some sellers to lower their listing price. A seller might decide they want to test the limits of the market, only to find they’ve gotten a little too greedy. It’s sometimes even intentional: Of course, this reduced price makes buyers feel like they’ve gotten a deal.

But when a regional housing market sees a huge spike in price drops, it usually means things are starting to cool down. That’s exactly what we’re seeing now.

Of the 108 regional housing markets measured by Redfin, 102 saw price cuts increase in May compared to the same month last year. In May 2021, in the typical market, 15.7% of its listings received a price drop. In the typical May 2022 market, 25.7% of offers received a price drop.

That fast cooldown – the wealth called the Great Deceleration – is hardly any more. Among the 108 regional housing markets that Redfin measured, 29 saw more than 30% of housing listings cut in May.

The regional housing markets with the sharpest price declines are in the very places that have risen the most during the pandemic. Look no further than Provo, Utah. The market, a short drive from several ski slopes, has seen a huge influx of telecommuters during the pandemic. Between May 2020 and May 2022, home prices in Provo rose 65.7% — well above the 37% surge that occurred nationally in the first 24 months of the pandemic. But when that pandemic-driven housing boom fizzled out last month, things changed quickly. In May, a staggering 47.8% of Provo sellers lowered their list price. That’s up from 12.2% in May 2021.

Check out this interactive chart on Fortune.com

Just behind Provo was Tacoma, Washington (where 47.7% of offers received a price cut); Denver (46.9%); Salt Lake City (45.8%); Sacramento (44.3%); Boise, Idaho (44.2%); Ogden, Utah (42.6%); Portland, Ore. (42.0%); Indianapolis (41.9%); and Philadelphia (41.2%).

But make no mistake: These list cuts don’t mean that house prices are falling nationwide every year. At least not yet. It’s normal for home prices to start falling month-on-month as the hot springs market slows and the slower summer months kick in. We’ll have to wait longer to see if year-on-year price declines — historically rare — will materialize.

Check out this interactive chart on Fortune.com

This nationwide cooling of the housing market is intentional.

Earlier this year, the Federal Reserve made it clear that it was going into anti-inflation mode. As a result, the financial markets quickly pushed up mortgage rates. Over the past six months, this has pushed the average 30-year fixed-rate mortgage rate up from 3.2% to 6.07%. This is a bigger deal than it first appears. If a borrower took out a $500,000 mortgage at a fixed rate of 3.2% in December, they would see a principal and interest payment of $2,162. At a rate of 6.07%, that rises to $3,020 per month over 30 years.

This increase in mortgage rates, coupled with a record increase in home prices, has priced out many would-be homebuyers. Some borrowers, who have to maintain strict debt-to-income ratios, have lost their mortgage eligibility entirely. All of this demand destruction has been enough to push the US housing market into cooldown mode.

The source of this data was not spared either. Just last week, Redfin announced it would lay off 8% of its workforce. The reason? “Dropping Redfin’s revenue, not laying off employees… With May demand 17% below expectations, we don’t have enough work for our agents and support staff,” the company wrote.

Where are you going next? The cooling on the housing market is likely to intensify further in the summer months. Freddie Mac’s deputy chief economist Len Kiefer says we’ve entered the “most significant drop in activity since 2006.” As home sales fall and inventories rise, the odds that home prices could actually fall year over year are increasing.

“I would say if you’re a homebuyer … or a young person looking to buy a home, you need a little fresh start. We need to get back to a place where supply and demand are coming together again and inflation is low again and mortgage rates are low again,” Fed Chair Jerome Powell told reporters last week.

If you want to keep up to date with the changing housing market, follow me on Twitter at @NewsLambert.

This story was originally published on Fortune.com

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