For the lucky few who are buying homes, this may be good news: The data show people selling homes are increasingly abandoning their original asking prices and offering their listings for a discount.
Nationwide 26 percent of the homes for sale are being offered with cut-rate asking prices, according to San Francisco-based housing data firm Trulia.com. That's up from 24 percent in July and 20 percent in March, when hopes were highest that the housing correction was over and the economy was on the mend. The market has weakened considerably since the U.S. government's first-time home buyers tax credit expired April 30.
Some cities are seeing more discounts than others, and the disparities are large. More than 40 percent of the listings in Minneapolis and Phoenix are marked down. In Detroit and Miami just 20 percent of listings are discounted.
Within these cities, homeowners in some neighborhoods have taken to discounting while those in others have not. Consider the case of Dallas-Fort Worth, Texas. About one-third of listings in Dallas are marked down from their original asking price; in Fort Worth, fewer than one-fourth of listings are marked down. In Milwaukee's Kilbourn Town neighborhood fewer than one-fifth of people selling homes have opted to abandon their original asking prices, while half of those selling homes in Donner Woods have.
The news isn't all bad for sellers. In Detroit only 16 percent of homes are being offered for a discount, which is a hopeful sign. It's worth noting, however, that when Detroit homeowners decide to slash their asking prices, they do it with gusto: The average size of the discounts is 25 percent, which is 2.5 times the average elsewhere.
Moreover, the prevalence of discounted listings is really no worse than it was in September 2009, when a generous government tax credit for first-time buyers was readily available. Perhaps the fact that the portion of home sellers slashing prices isn't any higher than 26 percent is a gilt lining. It may also be that sellers are just struggling to come to grips with how they should price their homes in a market where homes are trading hands at a fraction of the pace they were in 2006.
Still it's worrisome — for sellers and their neighbors, anyway — to see discounting back at 2009 levels. Many economists and real estate observers say heavy discounting can actually spook potential buyers, with those shopping for homes becoming convinced that the longer they wait to bid, the lower asking prices will go. Too much discounting leads to, well, more of it.
If you are shopping for a home, you'll be happy to hear that in some places where markdowns had previously been disappearing, they're now back. California, for one. Trulia said back in March that if you were shopping for homes in Sacramento, San Diego, Oakland, San Jose or Fresno, you'd find markdowns on fewer than 15 percent of listings. Now 20 percent to 26 percent of listings in those cities are discounted.
Trulia created two lists of 10 cities each: one where discounts are most prevalent and a second where discounts are least common. A slideshow of each follows. For each city, we list the neighborhoods where discounts are most or least concentrated.