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Mortgage Rates Rise Yet Again—Does That Mean Home Prices Might Fall?

The aspiration of home sellers hoping to fetch sky-high prices finally appears to be coming back down to earth.

“The percentage of homes with price reductions increased from 13.2% in February of last year to 14.6% this year,” notes Realtor.com economic data manager Sabrina Speianu in her analysis. “This is the first time the share of price reductions has increased over the previous year since May of last year.”

This is welcome news to homebuyers, who stand to face a formidable housing market this spring. Nationwide, median home prices hover at $415,500, while mortgage rates are at 6.88%.

“Price reduced” listings are not only on the rise, but they are also occurring in relatively large metropolitan areas rather than uninhabited corners of the U.S. Out of the country’s 50 largest metros, more than half (29) saw the share of price reductions increase year over year in February—a significant increase over just eight metros in January.

Why price reductions matter

A growing number of listings with reduced prices suggests sellers are reacting to market dynamics, and adjusting prices to attract buyers if they initially priced too high.

“Higher price reductions typically mean inventory is building and/or prices have gotten higher than buyers are willing to engage with,” explains Realtor.com senior economic research analyst Hannah Jones. “As a result, time on market increases and sellers start cutting prices to attract attention.”

Although home prices are still elevated, data indicates that buyers might find some leeway for negotiation when making offers, though this varies depending on the market.

So, when a buyer spots a home in a city with notable increases in price reductions, it can provide avenues for substantial savings.

Where to find homes with price reductions

Although the number of homes with price reductions will vary greatly by area, Southern markets saw the biggest increases in February, up by 1.2 percentage points compared with last year. The Midwest also saw a bump in price reductions of 0.5 percentage points.

This trend coincides with slower list price growth in the same areas, which means buyers are in the driver’s seat when it comes to negotiating.

Portland, OR, saw the greatest increase (+8.8 percentage points), followed by Miami (+4.9 percentage points), and Tampa, FL (+4.0 percentage points).

Ready to save some bucks as you navigate the spring housing market? Here are the top 10 metros where the share of home sellers slashing their asking price was up the most in February compared with last year.

1. Portland, OR

Metro median list price: $600,000
Increase in share of listings with a price reduction: +8.8%
Home for sale: 16527 NW Sheltered Nook Rd
Price: $975,000 (reduced by $25,000)

A price-reduced home for sale in Portland, OR(Realtor.com)

2. Miami, FL

Metro median list price: $550,000
Increase in share of listings with a price reduction: +5%
Home for sale: 10294 SW 33rd St
Price: $799,000 (reduced by $31,000)

A price-reduced home for sale in Miami, FL(Realtor.com)

3. Tampa, FL

Metro median list price: $416,000
Increase in share of listings with a price reduction: +4%
Home for sale: 13087 Stillmont Pl
Price: $405,990 (reduced by $3,000)

4. Columbus, OH

Metro median list price: $377,000
Increase in share of listings with a price reduction: +3.4%
Home for sale: 6754 McVey Blvd
Price: $429,900 (reduced by $20,000)

A price-reduced home for sale in Columbus, OH(Realtor.com)

5. Oklahoma City, OK

Metro median list price: $323,000
Increase in share of listings with a price reduction: +3.1%
Home for sale: 1018 NW 35th St
Price: $399,900 (reduced by $10,000)

A price-reduced home for sale in Oklahoma City, OK(Realtor.com)

6. Memphis, TN

Metro median list price: $325,000
Increase in share of listings with a price reduction: +3%
Home for sale: 839 N Watkins St
Price: $245,000 (reduced by $5,000)

A price-reduced home for sale in Memphis, TN(Realtor.com)

7. Orlando, FL

Metro median list price: $435,000
Increase in share of listings with a price reduction: +3%
Home for sale: 5304 Penway Dr
Price: $749,900 (reduced by $15,000)

A price-reduced home for sale in Orlando, FL(Realtor.com)

8. San Antonio, TX

Metro median list price: $335,000
Increase in share of listings with a price reduction: +2.9%
Home for sale: 10126 Mitra Way
Price: $449,900 (reduced by $3,000)

9. Dallas, TX

Metro median list price: $435,000
Increase in share of listings with a price reduction: +2.8%
Home for sale: 7515 Edgeware Rd
Price: $455,000 (reduced by $10,000)

A price-reduced, new-construction home for sale in Dallas, TX(Realtor.com)

10. Virginia Beach, VA

Metro median list price: $385,000
Increase in share of listings with a price reduction: +2.8%
Home for sale: 960 Old Cutler Rd
Price: $599,999 (reduced by $15,000)

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