Those who’ve been dreading a real estate bubble in light of rising housing prices across the U.S. can finally breathe a sigh of relief. According to CNBC, home sellers are beginning to lower their listing prices because home buyers aren’t able to afford them.
The most recent report from Zillow shows that 14% of housing prices in the U.S. have seen a price cut this past June. That’s up from the 11.7% of housing prices that saw a cut at the end of 2016.
What’s more, the growth rate of housing prices has finally begun to slow in at least half of the largest metropolitan markets including New York City, Los Angeles, San Francisco, and others.
Some home buyers may have seen the shift coming what with demand moving from larger and midsize cities to smaller cities in search of affordable housing.
The cause for the rising housing prices in recent years has been due to the high demand and low supply of housing, but this past year shows that demand can be lost if the supply isn’t affordable.
“The housing market has tilted sharply in favor of sellers over the past two years, but there are early preliminary signs that the winds may be starting to shift ever-so-slightly,” said Aaron Terrazas, a senior economist with Zillow.
The typical home sold was on the market for 3 weeks.
“A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price-points and primarily in markets that have seen outsize price gains in recent years,” Terrazas said.
It’s too soon to say that the nation is in a buyer’s market, especially with housing prices still fairly high. Yet, Terrazas says it’s a sign the housing market is beginning to return to normal housing trends.
This may come to a major relief to home buyers under the age of 40, who have been cutting back on their wedding ceremonies or have been delaying the ceremony entirely to save for a house.
The average American borrower puts down approximately 5% on their home purchase when making a down payment, but because housing prices have been rising that 5% could be as high as $40,000.
For some home sellers, the increase in price is due to aesthetic reasons. For instance, landscaping can boost your home’s value by 14% and approximately 69% of Americans say the smell and sight of flowers can make them feel happy.
Fortunately, some of these aesthetic changes may benefit the home buyers who do choose to invest in them. A house with a metal roof may be more expensive, but metal roofing has been known to lower homeowner’s insurance by 35%.
But rising prices haven’t all been due to aesthetics. Much of it has been caused by a low supply.
Homebuilders have already been struggling with high demand and in recent years millions of single-family homes across the U.S. have been bought by investors and turned into single-family rentals, reducing the supply of housing even more.
Now, areas like San Diego have seen price cuts in 20% of their listings. Seattle has seen price cuts in 12% of their listings. Even Austin, Texas, which has experienced an influx of technology jobs, is also seeing a drop in prices.
“We saw intense bidding on homes over the past few years, but that is calming down with more inventory in the area,” said B Barnett, a Reilly Realtors real estate agent in Austin. “Our inventory of homes is going up with new construction, and it is helping transfer power back to the buyer.”