Most Motivated Sellers
The ebb and flow of real estate are often highlighted by the prevalence of a “buyer’s market” or “seller’s market” – and when the pendulum swings to either end, the environment can be extremely cutthroat.
One of these unbalanced markets is characterized by “motivated sellers,” homeowners who are driven to get rid of their properties due to relocation, financial struggles, failure to get a suitable offer, or even as a last-ditch effort to sell a particularly difficult home.
However, could there be a way to predict when and where price cuts will be the most aggressive? To find the housing markets with the most and least motivated sellers and when those markets tend to peak for homebuyers, we conducted a study on the U.S., one of the biggest real estate markets in the world, and analyzed Zillow data from 2018 that contained information on the number and size of residential price cuts by location.
Continue reading for our findings and research.
Which States Experience Price Cuts Most?
The national average percentage of home listings with price cuts rests at 13.3%, capped by Illinois with almost 17% of properties and Vermont on the low end with 9%. With these numbers in mind, it’s key for buyers and sellers to know where they stand in their neighborhood’s unique real estate climate.
Typically, the main incentive for buying property is to think of the purchase as an investment, but many Illinois residents are struggling to sell their homes. Massive rates of outmigration are stranding many sellers with unwanted homes and out-of-control mortgages. Further adding to the bleak outlook for the Illinois housing market, the state has the second-most communities on the list of the 50 most at-risk housing markets, according to a study by GO Banking Rates.
Inversely, Vermont is home to a housing market that saw an over 100% increase in home values between 1997 and 2007, followed by relative price stagnation in years after. The Green Mountain State boasts housing costs at nearly 20% higher than the national average, leading to a more expensive real estate market and less likelihood of sellers opting for price cuts.
Sellers looking to attract buyers may be forced to consider a price cut due to poor market conditions, especially if they’re motivated to do whatever it takes to get their property sold. This can benefit buyers who are snagging a bargain while also getting an expedited homebuying experience.
Buyers Save the Most in Hawaii and Washington, D.C.
While Hawaii had the most potential savings from a price cut, it also had the highest median list price, followed closely in both regards by Washington, D.C. Sellers in these areas offer higher-than-average prices, and our data shows that they also offer higher-than-average savings for hungry buyers as well.
The nation’s capital and Honolulu (Hawaii’s largest urban center) rank No. 4 and No. 9 on the top 10 highest-cost-of-living cities in the United States, respectively, giving them high seller’s market preference. However, after years of steadily rising costs in Hawaii, potential buyers are seeing the highest savings through price cuts: From November 2018 to April 2019, the average home on Oahu dropped from over $800,000 to $760,000. So while still an expensive place to put down roots, buyers looking to settle in Hawaii have seen some savings in recent years.
States toward the bottom of the list had less potential savings, but this may actually indicate more affordable housing markets. For example, in Oklahoma, the state with the lowest average price cut savings, buyers might be less likely to rely on price cuts to obtain a home within their budget.
Popular Months for Buyer Savings
When are you most likely to get a price cut and a good deal on your next home purchase?
A majority of states experienced the highest price cut percentages in January and December. This may mean that it’s harder to sell during the winter months. Winter is often considered the offseason for home buying as most people try to lock down sales in the spring and summer months before school begins.
No states had the highest price cuts during the warmer months of June and September, meaning sellers may hold more control over the market than buyers at that time. In fact, summer months mean more competition and a need to settle before the school year, so buyers may be willing to pay the asking price.
Most Listings With Price Cuts Occur in August, September, October
August, September, and October were the only months when states experienced maximum price cuts, with October leading the pack. Over 17% of listings during this month included at least one price cut.
While the winter months typically had higher price cut percentages, the fall was when the percentage of all listings with at least one price cut started to rise, with October boasting the highest national average percentage of listings with price cuts. It’s also the month that a majority of states saw the most listings with reductions in price.
Which Cities Lead in Price Cuts?
Tampa, Florida, had the highest average percentage of listings with price cuts in 2018, while San Francisco, California, had the lowest. Located on Florida’s west coast, Tampa had nearly 21% of listed properties requiring a price reduction. Experts say home prices have peaked in this area, slowing a trend of strong price gains for sellers.
Less than 1 in 10 listings in San Francisco, however, had to resort to price cuts to lock in a deal. The city is home to one of the most highly competitive housing markets in the nation, although housing costs have been declining year over year.
Meanwhile, Buffalo, New York, and Phoenix, Arizona, had the highest and lowest average percentage price cuts, respectively. Buffalo is currently experiencing rising home values and a seller’s market, while homeowners in Phoenix are witnessing much of the same trend, indicating that seller’s markets can produce conditions with both high and low levels of price reductions.
Buying or Selling in the UAE? Trust Us With Your Search
Picking the right price to value your home can be excruciatingly tough as a seller, especially if you’re trying to get your money’s worth out of the investment. It’s important to pay attention to trends in large economic markets like the United States, the UAE, and all over the world in which you may look to invest.
It can be equally difficult finding a new place to live, especially if you’re looking to call a new country home. Estimates have expats making up around 90% of the UAE workforce.
With 43,000 units added to Dubai’s total residential stock in 2018, and both the off-plan and resale markets experiencing year-over-year growth (15% and 23% respectively), the UAE could be the perfect place for you to settle.
With so many options and avenues, it can be difficult to find the unit and price that’s best for you, which is why Bayut is here to help! Whether you’re looking to rent in sunny Palm Jumeirah or even in the imposing Burj Khalifa, our house-hunting or selling tools will keep you on top of the best listings.
Methodology and Limitations
Using housing data from Zillow, we looked at which states and metropolitan areas had the most motivated sellers in 2018. We measured motivation by looking at both the median percentage price cut on listings as well as the percentage of total listings with price cuts.
The data were for each of the 12 months in 2018. From this, we calculated overall year averages for the median percentage price cut and the percentage of listings with a price cut.
We chose to also present potential savings homebuyers could get by purchasing a home with a price cut in each state. This was calculated using the average median list price multiplied by the average median percentage price cut.
In the parts of this project that examine price cuts in metropolitan areas, we performed our analysis on the 50 largest metropolitan areas as ranked by Zillow.
Fair Use Statement
If you or someone you know is looking to purchase property and could benefit from our findings, you’re free to share this project for any noncommercial reuse. Just be sure to link back here so that readers can see the full study and review the methodology. It also gives credit to our contributors for their hard work.
