The residential real estate market in the U.S. has been on an unprecedented run. Partially due to the migration of people from the largest coastal cities during the COVID-19 pandemic, home prices in mid-sized and smaller cities have increased — by double digits in the majority of cases.
The carefully followed S&P Case-Shiller home price index for June showed nationwide home prices rose 18.6% year over year. In Phoenix, the figure was 29.3% for the same period. However, in Des Moines, Iowa, the trend might be beginning to reverse. While home prices are still rising in Des Moines, the city has had the largest percentage of homes for sale that have had their prices cut in the second quarter.
There are other factors driving the jump in home prices. Among them are historically low mortgage rates, which make homes many people could only dream of owning more affordable. And, as people continue to work from home, where they live can be based on lifestyle preferences and not where their employers are located. These are the best cities to live and work from home in 2021.
In a few cities, however, there is a higher percentage of homes undergoing price cuts. In Realtor.com’s recently released report titled, “Boon for Buyers: 10 Cities Where Sellers Are Slashing Home Prices,” Senior Economist George Ratiu explained, “In our July data, about 45 cities from the top 300 largest showed an increase in the number of homes with price cuts.” Ratiu added that for buyers, this could mean “a less frenzied market, with more choice and better prices.”
There are several reasons these markets may be running against the tide. One is lack of demand. Another is that in some markets, it may be traditional to price homes well above what they are likely to sell for and then reduce the price if the home sits on the market unsold for too long. These are the most expensive towns to buy a home in the nation.
The city with the largest percentage of homes for sale that have had their prices cut is Des Moines, at 32%. The median asking price for a listed home is $193,050, which is about two-thirds of the national figure. In other words, Des Moines can be considered an “affordable” market.
One reason Realtor.com researchers think there have been price cuts is additional inventory that has become available recently. Another is that high home prices may have caused people to simply drop out of the market. Since home prices trends by market continue to shift rapidly, the situation in Des Moines could change again.