“December marked the seventh straight month in which this rate dropped, after the share of homes selling above list reached 24 percent in May 2018 — the highest share since the onset of the housing market recovery.” - Zillow
All good things must end.
Or at least that seems to be the case for real estate investors that have savored years of progressively more homes selling above their listed price, Zillow found in a new analysis.
The share of homes that sold above list price plummeted in the latter half of 2018, and as of December, only 19.4 percent of homes were sold above their list price. That’s the lowest share of above-list sales in almost three years, according to Zillow.
“December marked the seventh straight month in which this rate dropped, after the share of homes selling above list reached 24 percent in May 2018 — the highest share since the onset of the housing market recovery,” Zillow wrote. “The high peak and subsequent fall signify changing trends that occurred across the national housing market in 2018.”
Shifting factors in the housing market — namely increased inventories and increasing mortgage rates — are to blame, Zillow found.
Mortgage rates on averaged jumped above 4.9 percent in November, which was the highest level since 2011. Those hikes likely tempered buyers’ rush to bid on homes.
Mortgage rates reached above 4.9 percent in November, the highest level since 2011, causing some buyers to be more conservative in their bidding. The final quarter of 2018 also realized the first inventory gains in three years, easing competition on buyers, Zillow said.
Compounding sour news for sellers, the average price above list also dipped. Among homes sold above list price, the typical amount above list has remained more than $6,000 for several years. As of December, the median amount dropped to $5,860, despite the median discount for homes selling below list price remaining steady. Zillow said that this seems to indicate that buyers and sellers are better syncing their price expectations.
Big metros on the West Coast led the pack in the decline of homes bid up nationally, Zillow found.
Each major West Coast market had significant year-over-year drops in December, most prominently in San Jose, Calif., San Francisco and Seattle. San Jose dropped 46.6 percentage points (from 82.9 percent to 36.3 percent), San Francisco fell 26.7 points (from 69.3 percent to 42.6 percent) and Seattle dipped 25.7 points (from 50.3 percent to 24.6 percent), according to Zillow.
For more information, check out Zillow’s full report here.