As a sure sign of a cooling home sales market, price reductions have become common in Utah in the past few months, according to new report from Redfin (redfin.com), an technology-powered real estate brokerage. Provo, Salt Lake City and Ogden all were in the top 10 metros nationwide for home price drops.
Nearly half (47.8 percent) of homes for sale in Provo had a price drop in May, the highest share of the 108 metropolitan divisions in the analysis. Tacoma, Washington, had about the same share of price cuts, at 47.7 percent. Next came Denver (46.9 percent), Salt Lake City (45.8 percent) and Sacramento (44.3 percent). Boise (44.2 percent), Ogden (42.6 percent), Portland (42 percent), Indianapolis (41.9 percent) and Philadelphia (41.2 percent) round out the top 10.
Provo, Boise, Salt Lake City, Sacramento and Ogden were also the top five metros with the biggest increase in the share of listings with price drops from a year earlier. Roughly 12 percent of listings in Provo and Boise had a price drop in May 2021 and it was around 20 percent in Salt Lake City, Sacramento and Ogden.
Many of the metros with the biggest share of price drops in May had outsized price growth during the pandemic because they were hotspots for people moving in from other parts of the country.
“There are two kinds of sellers in today’s market: Those who already know the market has cooled and those who are learning about the cooling market as they go through the selling process,” said Daryl Fairweather, Redfin chief economist. “The former wants to sell quickly before the market slows further and they’re willing to price slightly below comparable homes in their neighborhood right away, and the latter may have to drop their price if their home doesn’t attract buyers within a few weeks. As more sellers come to terms with the slowing market, fewer homes will have price drops.”
About half of the metros in the Redfin analysis saw more than 25 percent of home sellers drop their asking price in May. More than 10 percent of home sellers dropped their price in all 108 metros, driving the national share of price drops to a record high.
The uptick in price drops is symbolic of the slowdown in the Redfin said. Many buyers are backing off amid skyrocketing home prices, surging mortgage rates, high inflation and a faltering stock market.
Four of the 10 metros with the highest share of price drops — Provo, Salt Lake City, Boise and Ogden — are among the 10 places where prices increased most during the pandemic. Prices shot up 65.7 percent to $550,000 from May 2020 to May 2022 in Provo. They rose 56.2 percent to $556,000 in Salt Lake City, 66.7 percent in Boise to $550,000 and 57.2 percent to $500,000 in Ogden.
The soaring prices were largely due to out-of-town homebuyers moving in during the pandemic, competing with locals for a limited supply of homes. Migration into both Boise and the Salt Lake City metro area — which includes Provo and Ogden — nearly tripled throughout 2020. The trend has started to reverse in both places, with Salt Lake City seeing a net outflow (more buyers looking to leave than move in) for the first time on record in the first quarter.
The share of homes with a price drop increased from a year earlier in 102 of the 108 metros in the analysis. It declined in six metros: McAllen, Texas; Elgin, Lake County and Chicago, Illinois; Fresno, California; and Springfield, Massachusetts.