Despite historically low consumer confidence in the housing market, home sellers still don't seem to have a handle on what their homes are worth; either that, or home prices are deteriorating faster than expected.
A new survey from real estate website Trulia.com finds that 25.6 percent of homes currently on the market in the United States, as of Oct. 1, 2009, have experienced at least one price cut. That's for the fourth straight month. The total amount of presumed home equity slashed is $28.4 billion, or almost a billion dollar increase from June. (Slideshow: Homes with price reductions of over $1 million).
"It's trick-or-treating season, and the housing market is seeing its share of both," says Pete Flint, Trulia co-founder and CEO. The average discount for price-reduced homes is holding steady, however, at 10 percent off the originial list price, but the pain seems to be shifting.
“Interest in real estate typically wanes at the end of the year, which means that sellers who didn’t aggressively price their homes may find themselves making difficult decisions to reduce their prices or delay the sale until interest piques again in January," he said.
Four of the five states with the highest percentage of price reductions are in the Northeast. They are Massachusetts, Rhode Island, Connecticut and New Hampshire, with an average of 33 percent of all homes on the market cutting their list price at least once. The largest price cuts, however, continue to be out West, in Nevada, Arizona, Wyoming and Idaho. Sellers there are slashing an average 13 percent of the list price.
Price declines eased over the summer, but the rising inventory of foreclosed properties is causing concern that we could see another dip further down this fall.
The national median existing home price was down 12.5 percent in August from a year ago, according to the National Association of Realtors.
"The market is recovering but not yet settled. Last minute chaotic home price changes are evidently still taking place, though there are signs that the sold-to-list prices are narrowing in areas with rising sales. The new appraisal process could also be one of the reasons for the need to slash price," says the Realtors' chief economist Lawrence Yun. "During market transition data often move in conflicting directions."
The biggest discounts are at the high end of the market. Luxury homes (those listed at two million dollars and above) are taking an average 14 percent off the original list price. Athough they represent barely 2 percent of all current listings on Trulia, they are responsible for 25 percent of the total $28.4 billion in price reductions. This is likely due to the fact that while sales are surging on the low end of the market, they have ground to a near halt on the high end. The still tight jumbo loan market is making sure of that.
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