The extraordinary recovery of the housing market since the Great Recession may have ended. After the home prices in several major markets lost much more than half their value in the recession, they have recovered and, in some cases, moved above their original peaks, which primarily occurred in 2005. Recently, homeowners have begun to cut prices again. In the most recent four-week period, the prices of 26.6% of homes for sale in the United States have been dropped. The housing boom shows signs of ending.
The most recent data on home prices comes from home sales service Redfin and covers the four weeks that ended September 16. A drop in a home’s price is calculated if that reduction is between 1% and 50%. Researchers at Redfin reported that the four-week drop was the sharpest since 2010, when the firm started to keep records. The data are only for markets in which Redfin provides it service.
Taylor Marr, Redfin senior economist, said:
After years of strong price growth and intense competition for homes, buyers are taking advantage of the market’s easing pressure by being selective about which homes to offer on and how high to bid. But there are some early signs of a softening market, and the increase in price drops may be another indicator that sellers are going to have trouble getting the prices, and the bidding wars, that they may have just months ago. Instead, many are finding their homes are sitting on the market without much interest until they start reducing their prices.
The markets in which prices fell were, in some cases, those that were most badly hurt after the last housing boom:
Las Vegas (+12.3 points to 28.1%), San Jose (+10.7 pts to 25.7%), Seattle (+10.1 pts to 37.1%), and Atlanta (+9.0 pts to 27.9%) were among the markets that posted the biggest year-over-year increases in the share of homes with price drops.
California in general had some of the largest markets with price reductions during the recession. Few markets had such large price erosion in the same period as Las Vega.
In coming weeks, it will become clear if the price drops are a blip or a major trend. If they are a trend, the housing recovery is over.