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SALT LAKE CITY — Yet again, a city in the West has seen the nation's largest share of home sellers cutting their asking prices.
In May, it was Provo, Utah. In June? Boise, Idaho.
That's according to the latest data from Redfin, which shows nearly two-thirds — 61.5% — of homes for sale in Boise, Idaho, had a price drop in June. That's the highest share of the 97 metro areas included in the national real estate brokerage's analysis.
Another western city, Denver, took the No. 2 ranking for the city with the largest share of homes that saw price cuts, with 55.1%. Next, in the No. 3 slot, is Salt Lake City — which saw a 51.6% share of homes with asking price cuts.
What's up with housing in the West?
The common denominator for all of these cities? They're all in the West where housing markets exploded, especially over the last two years after the COVID-19 pandemic sent the national housing market into a frenzy.
That rush had an outsized impact on the West, in particular, where cost of living and housing has been considerably more affordable than big cities like California and New York.
Redfin notes it in its report published Thursday.
"Boise, Salt Lake City, Sacramento and Tampa were popular during the pandemic with homebuyers moving in from pricey coastal job centers, taking advantage of low mortgage rates and remote work. Their popularity led to heated competition for a limited supply of homes for sale, pushing up prices and making them unaffordable for many buyers.
Utah — one of the fastest growing states in the nation — was already facing a housing shortage before the COVID-19 pandemic hit, so prices were already climbing. The pandemic only accelerated that home price growth.
As the West became an appealing destination for Americans set free by remote work, demand skyrocketed even more, translating to yearly double-digit price increases that have compounded to over 50% or even 60% price increases in some areas.
"In Boise, for instance, the typical home sold for $550,000 in May, up more than 60% from two years earlier," Redfin's report states.
Now, as the Federal Reserve continues to battle inflation, higher interest rates are taking their toll, especially in states like Idaho and Utah. Price cuts seen in May and June are the first signs that sellers are grappling with this new reality — that buyers do have a breaking point.
"Home sellers are contending with a rapidly changing market, especially in places where they're used to their neighbor's homes getting multiple offers and selling for more than asking price," said Sheharyar Bokhari, a senior economist at Redfin.
"Higher mortgage rates and a potential recession are causing prospective buyers in popular migration destinations to press the pause button, and they're also having a big impact on workers in big job centers who rely on their stock portfolio for down payments," Bokhari said.
Other cities have also seen larger shares of homes with price cuts in June. Tacoma, Washington, saw 49.5%; Grand Rapids, Michigan, saw 49.3%; Sacramento saw 48.7%; Seattle saw 46.3%; and Portland, Oregon, saw 45.7%.
Buyers in places like Denver, Seattle and Portland may be feeling apprehension due to a shaky economy and faltering stock market, Bokhari noted. "Sellers are adjusting their expectations in real time as they realize they may not get the price their neighbor got two months ago."
However, if demand "plateaus" over the next several months, price cuts could become less common as sellers get a better feel for the market and set their prices at more realistic levels to begin with, Bokhari said. "But if demand falls further, sellers will continue to play catch-up and cut prices to attract buyers."
Is it too late to sell?
So as the market cools, have sellers missed their chance to sell at the high point? Maybe so, Redfin economists and agents said. They're advising sellers to list homes sooner rather than later, predicting price growth will likely slow throughout the rest of the year.
"Today's sellers feel they've missed out on the hot sellers' market and in some ways they have," said Andy Potarf, a Redfin real estate agent in Denver. "They're probably not going to get multiple offers and sell their home way over asking price, but we can still sell a home for a fair price."
It's important to note monthly listing price drops aren't the same as a price crash or an actual decrease in Utah's home price trajectory, which has been on the rise ever since the 2006 U.S. housing market popped and bottomed out in 2009.
Experts have said it would likely take an economic sea change — sweeping layoffs, foreclosures and a dismal job market — to drastically disrupt Utah's housing price trajectory and send statewide prices spiraling downward.
And price listing cuts aren't unusual — in fact they're common for sellers, especially motivated sellers, to cut their listing price if they're finding their initial listing price might have been too high to be competitive with other listings.
However, if a regional market sees sweeping price cuts, "it usually means things are beginning to cool down," as Fortune recently put it. "That's exactly what we're seeing right now."
