How high can property prices go? We may have reached the tipping point.
A Redfin sales trend update for May listed Tacoma, Boise, Sacramento and other cities among cities that saw home price declines.
Provo and Tacoma saw the largest percentage of price declines, with 102 of 108 Metros Redfin reviewed reporting an increase in the proportion of homes with price declines from a year ago.
According to Redfin, “Nearly half (47.8%) of the homes for sale in Provo, Utah (about 45 miles from Salt Lake City) saw prices fall in May, the highest proportion of the 108 metro areas in this analysis. Tacoma had about the same share of price cuts at 47.7%.”
In comparison, Tacoma saw only 28.2% of listings drop in price in May 2021. The median selling price in Tacoma as of May 2022 was $575,000, up 46.8% from the same period in 2020, according to Redfin.
Provo only saw 12.2% of deals discounted last May. The average home price for May 2022 was $550,000, a 65.7% increase from May 2020.
Provo and Tacoma were followed by Denver (46.9%), Salt Lake City (45.8%) and Sacramento (44.3%). Boise (44.2%), Ogden, Utah (42.6%), Portland, Oregon (42%), Indianapolis (41.9%) and Philadelphia (41.2%) completed the top 10, according to Redfin.
Seattle saw a 40.6% share of homes for sale fall in price, with a 24.2% drop a year ago and the average selling price of $850,000 up 46.6% from 2020.
“Price declines are particularly common in mid-sized western metro areas — particularly Utah — many of which have experienced outsized price growth during the pandemic because they were hotspots for people moving in from other parts of the country,” the Redfin report said. Almost half of the homes for sale in these markets are seeing their prices fall.
“Four of the 10 subways with the highest percentage of price declines — Provo, Salt Lake City, Boise, and Ogden, Utah — are among the 10 places where prices have risen the most during the pandemic,” she noted.
Kellie Van Essen, an agent with the John L. Scott Tacoma University Place bureau, told The News Tribune on Wednesday that the news was “universally positive.”
“What happens is that the market levels off. It’s going to be a normal market,” she said.
Van Essen noted that this is happening nationwide, not just here.
“It’s a bit shocking. The change, even looking at some of my offerings from March through May or June, has been remarkable, she said.
Homes sold in April and May got one offer, she said, compared to December-January when, for example, a condominium she listed in Fife “got 19 offers and had 65 showings”.
Now, in some cases, impatient sellers are panicking and dropping prices “four or five days or seven days” after the listing, she said.
She said it’s not only “a great time to buy with really good interest rates,” but it’s also a time to educate sellers.
“The last three years … this is not the normal market. The normal market is you get an offer within 30 days,” she said.
She also recommends against rapid price reductions.
“There was a listing that cost $800,000. Probably a week later we got $75,000 below list price [offer], and I recommended not to take it. And then, about a month later, we got an offer that was above list price, she said.
Those days above list price seem to be dwindling.
Real estate agents across the region warned in the Northwest Multiple Listing Service’s May report that a course correction was imminent even as high deal prices continued.
According to NWMLS, the average selling price for gated single-family homes in Pierce County was $582,000 in May, compared to $510,000 a year ago and $579,980 in April. With 1,909 new single-family home listings in May, the county saw a 73.64% increase in the total number of active home listings year-over-year.
“There are two types of sellers in today’s market: those who already know the market has cooled and those who learn about the cooling market during the selling process,” said Redfin chief economist Daryl Fairweather.
“As more sellers come to terms with the slowing market, fewer homes will see price declines,” Fairweather noted.
Redfin said the proportion of homes with price declines fell in six metro areas in the 108-city survey: McAllen, Texas; Elgin, IL; Chicago; Fresno, California; Lake County, Illinois; and Springfield, Massachusetts.
The hunt for the next bargain never ends. Boise Redfin agent Shauna Pendleton noted in the report that those who used to seek bargains and a “quiet, slow-paced lifestyle” in Boise left after such an influx of new neighbors in a red-hot market.
“These people are cashing in their equity to move to more affordable areas, mostly in the Midwest, where they get more bang for their buck — in some cases, they can even pay cash for everything,” Pendleton said.
Van Essen saw the same thing in the Puget Sound region:
“I have a colleague, a friend, and three of my salespeople who all moved to Texas because it’s so expensive here.”