Price drops are "becoming increasingly common" in some of the most popular housing markets across the United States.
According to new Redfin data, more than 20% of home sellers dropped their price in seven of the 10 most popular migration destinations last month: Cape Coral, Florida; Sacramento, California; North Port, Florida; Tampa, Florida; Atlanta, Georgia; San Antonio, Texas, and Phoenix, Arizona.
Although the price drops are becoming more common, they are the result of rising mortgage rates, which is pricing out buyers and driving down demand.
"When mortgage rates were at or below 3%, both local and out-of-town homebuyers were more willing and able to tolerate high prices, but at 5%, many are now priced out," Redfin chief economist Daryl Fairweather said in a statement. "A home’s price is driven by the balance of supply and demand, and when demand drops off and supply increases like it is now, rapid price increases evaporate quickly."
A For Sale sign is displayed in front of a home in Miami, Florida. (Photo by Joe Raedle/Getty Images)
Areas that saw a huge surge in migration and sharp increases in home prices over the past two years are now seeing "an abrupt drop-off in demand," which is forcing sellers to "drop their prices with increasing frequency," Fairweather said.
In April, 41% of home sellers in Boise, Idaho, dropped their price, which is up 10% compared to a year ago and the largest share of home sellers in Redfin’s analysis.
Over the past two years, home prices in the area were up 62%, according to Redfin.
Cape Coral, Florida, was not far behind, with 33% of sellers dropping the price of their homes, according to Redfin. In New Orleans and Baton Rouge, Louisiana, 32% and 31% of home sellers, respectively, decreased the price of their home.
The data also shows that 30% of home sellers in Sacramento decided to drop their price.
"For home sellers in these markets, the sharp increase in mortgage rates has knocked some of the wind out of a housing market that had been super-charged by surging migration," according to Redfin.
In fact, those aforementioned sellers are "driving the national rate of price drops to its highest level since October 2019," according to Redfin.