The Never Ending Price Cuts in Home Prices

If you have had a home for sale on the market for a while, you have probably had to get used to the notion that you have either cut the selling price or that you will have to very soon.  A report from Trulia.com today shows that more than one in four houses for sale have gone through at least one price cut.   The report puts 25.6% of homes on the market as of October 1, 2009 having had at least one price cut, and it further stated that one in four home listings have cut prices for the fourth straight month.

Prices have now come off $28.4 billion, and that is listed as a gain of $967 million just since June 2009.  The price discounting has remained steady at 10% off of the original listing price.

There still exists a problem in many local markets according to our discussions with realtors and homebuilders.  Many houses are still selling in the market for less than what the cost to build them.

The biggest price cuts are coming in the Northeast, where almost one-third of the listings measured have gone through official listing price cuts.  But the leading price cuts have actually been in the Western states where the average has been a 13% price cut.  This does not consider what the real selling prices are, nor does it include the throw-in terms that sellers are having to give.

Of the $28.4 billion national discounted figure, some 35% of the reductions were attributed to New York, California and Florida.  And the rich are not immune.  The nationwide figure of luxury homes valued at $2 million and more have an average of 14% being taken off the listing price.   Trulia noted that the luxury home market accounts for only 2% of its listings, but is responsible for one-fourth of that $28.4 billion in discounts.

The lowest discount averages were listed as 6% off the original listing price, with those cities being listed as Arlington, TX; Houston, TX; Omaha, NE; and Tulsa, OK.  The four highest average price reductions from the original listing prices are as follows: 14% for Mesa, AZ; 15% for Miami, FL; 16% for Las Vegas, NV, and 25% for Detroit, MI.

As a reminder, this is only one report out there among many.  But the most interesting notion here is that the data is more current as it is listed as of October 1.  Making a direct tie to inflation and housing is not exactly comparing apples to apples.  But it is hard to imagine inflation taking off through the roof as long as the price of housing keeps getting lower and lower.

JON C. OGG
OCTOBER 8, 2009