SEATTLE, Washington. July 19, 2020 (Zillow) — Home sellers this spring/early summer are holding firm on their original list prices at the highest rate in years, only rarely updating their listing on Zillow with a lower price. In the week ending June 27, the original price had been cut at least once on a mere 4.1% of listings, compared to 5.6% in the comparable week of 2019 and 5.2% in the same week during the generally strong market of early summer 2018.
The data strongly suggest that sellers understand how little competition they truly face in the current environment: Active listings remain near record lows nationwide. Buyers may not like or agree with the asking price on homes they like, but realistically they may not have many other options but to accept it.
From January through mid-March, the share of listed homes with price cuts was already a little lower year-over-year — a testament to the strength of the pre-pandemic housing market and sellers’ generally strong negotiating position. Even so, the gap was modest: Down from 4.3% to 4.0% in the comparable weeks ending March 14 in 2019 and 2020, respectively.
The onset of the coronavirus pandemic subsequently upended the normal seasonal pattern of price cuts, which typically rise in frequency between February and October over the course of the traditional home selling season. The share with a price cut fell every week until April 25, bottoming out at a rock-bottom 2.9%, far below the 4.8% share from the comparable week in 2019 and the 4.2% recorded in 2018.
This barometer of pressure on sellers has risen somewhat since, but seems to be leveling off at slightly more than 4%. Every one of the nation’s 35 largest metro areas currently has a smaller share of listings this year that have had a price cut compared to the same period last year. Among large U.S. metropolitan areas, New York (2.8%), Miami (3.3%) and Riverside (3.8%) have the lowest share of listings with a price cut — with New York’s level lower even than typical seasonal lows in December.
At the other extreme, those shopping in Denver (9.1%), Indianapolis (7.4%), and Chicago (6.9%) will see the largest share of listings with price cuts. The biggest year-over-year declines in price cut frequency occurred in Portland (-3.3%), Las Vegas (-3.2%), and San Diego (-3%).
Expectations Vs. Reality
The most-recent listing price data run somewhat counter to prevailing views on the buyer/seller dynamic expressed in the early days of the coronavirus outbreak, when buyers and sellers alike said they thought buyers had the upper hand in the market. A majority (59%) of current/prospective home sellers that responded to a Zillow survey fielded from April 10-April 27 said the current market was slightly, somewhat or much better for buyers.
Similarly, a majority of current/prospective buyers (53%) surveyed over the same period said buyers had an advantage over sellers. Even so, additional data from the surveys may point to a cause for the ultimate trend of sellers retaining their pricing power. In mid-late April, similar majorities of buyers and sellers (55% of each group) said it was a bad time to sell a home, according to the Zillow survey — and clearly, given currently record-low inventory levels, many would-be sellers fulfilled their own prophecies and decided not to list.
But the fact that many sellers chose not to list has seemingly only strengthened the hand of those sellers that did — relatively high demand from buyers, coupled with incredibly limited supply, helped put a floor under prices throughout the spring. Fast-forward to today, and despite working around ever-evolving reopening plans that limit traditional home showings, sellers’ hesitation to cut prices appears to be paying off: Sellers are now getting satisfactory offers faster than last year.
And as the housing market continues to show its resilience, the sentiment expressed in the early days of the pandemic appears to be reversing: Fannie Mae’s National Housing Survey showed a huge rebound from May to June in the share of people saying it’s a good time to sell, from a net (“% good” minus “% bad”) of -30 in May to only -7 in June.
The share of listings with a price cut in any given week is computed by tallying up all the active listings for which the list price is lower on the last day of the week than on the first day of the week, and then dividing by the number of listings active at any point in the week.