In the wake of elevated mortgage rates and rising year-over-year inflation, homesellers are doing their best to stimulate buyer behavior and get their listings off the market.
According to a recent report by Bright MLS Chief Economist Lisa Sturtevant, about 40.1% of market listings in the Mid-Atlantic region have had their prices reduced as of late July. While not a wholly dissimilar number to last year’s rate of 39.9%, the share of active listings reduced in price has steadily increased since 2023, when the rate was 30.7%.
Mike Simonsen, chief economist at Compass, echoed this sentiment in a recent video about nation-wide home price reductions for August.
“As of now, 41.1% of the homes on the market have taken a price cut from the original list price. That’s up nearly 50 basis points for the week and getting very close to overtaking last year’s level,” he said.
Yet not all price reductions are created equal. The Bright MLS report states that the “likelihood that sellers will need to drop their asking prices depends strongly on local market conditions as well as how long the home has been on the market.”
“Overpricing a home increases the chance that it sits on the market and forces a more significant price reduction down the road,” the report said.
Mid-Atlantic markets in focus
Market conditions vary strongly throughout the Mid-Atlantic region, which includes Maryland, Washington D.C., Pennsylvania, Delaware and Virginia. Areas with higher shares of active listings with price reductions also showed higher rates of inventory.
“The active inventory (nationally) is 1.1 million homes on the market, that’s including single-family, condos and townhouses. It’s actually 1% fewer than last week and about 1% more than the same week a year ago,” Simonsen said. “Nationally, the supply of homes on the market is basically unchanged from last year. If you haven’t been paying attention to the data, this might come as a surprise, but that’s the reality.”
Nearly half (48%) of the active listings in the Maryland Eastern Shore region had experienced a price reduction, followed closely by the Delaware/Maryland Coastal region at 47.6%, according to Bright.
Although the eastern part of Maryland edges slightly higher, the Delaware/Maryland Coastal region greatly overshadows all others in terms of housing inventory and listing lifespan.
“Across all subregions in the Bright MLS service area, the Del/Mar Coastal region has the highest inventory at 4.83 months of supply, and through the first half of the year, the median days on market in the region is 42,” the Bright report states.
Simonsen explains the relationship between price cuts and demand—as home prices inch higher, more and more sellers are reducing their asking prices in the hopes of attracting buyers. “This makes sense. Demand is lighter, homebuyers have felt the affordability pinch for years now,” he said.
Inversely, Central Pennsylvania has a highly competitive housing market, where listings sell in a median of 10 days. According to the Bright report, Central Pennsylvania’s share of listings with a price cut are 36.6%, alongside an inventory of 1.84 months supply.
The Bright MLS report concludes that for all subregions in the Mid-Atlantic, how long a property spends on the market is “the absolute strongest predictor of a price reduction.”
But the Mid-Atlantic may not be a universal predictor.
“Like all the housing market data, price cuts have very local behavior,” Simonsen said. “In some markets it’s normal to have only 20% of the homes need a price cut before selling. In other markets 40% is normal.”
Rather than applying the same rules to each region, Simonsen emphasized the need to look at the bigger picture by examining how quickly this behavior changes.
Sellers and inventory
While mortgage rates—which have slowly decreased in recent weeks but still remain in the high 6% range—do impact buyer behavior, sellers can look in other areas to determine what kind of market they’re in.
“Sellers are very hesitant to drop prices immediately,” the report states. “Across the Bright MLS service area, only less than 1% of listings see a price cut in their first week. Even in the one-week to 13-day window, cuts are still relatively rare, with just 4.0% of active listings seeing a price cut.”
The chances of seeing a price reduction skyrockets after a certain amount of time. According to Bright MLS, 19.3% of listings that have spent three weeks to 27 days on the market have experienced price cuts. Yet once those homes reach the four week mark, the share of discounted listings soars to 52.4%.
“Sellers should pay attention to the price-cut trends in their local markets. Some places have super tight inventory,” Simonsen said. “If we’re lucky and we get some good news, for example, from the Middle East, then maybe we get some affordability improvements for homebuyers in the next few months.”
A home’s market lifespan and the percentage of those homes with lowered prices are susceptible to outside factors, such as elevated mortgage rates and inflation. But the supply of homes is slower to change with the times.
“The supply of homes is not really growing. Some markets have more supply than a year ago, others have fewer. The markets in the crisis shortage—like Chicago—are not yet showing any growth in inventory really, which is unfortunate for buyers there,” Simonsen said.
“There are really no parts of the country where the supply of homes is climbing rapidly. We counted 81,000 new listings this week, this is about 1% more than a year ago. That pace continues to be 10 to 15% fewer sellers than there were at any given week in August of the last decade. So at that time, 100,000 sellers per week would be totally common in August. Now it’s barely over 80,000.”
Overall, listing agents should observe the market they’re in and keep buyers’ budgets in mind when deciding to diminish their home prices, according to Bright and Simonsen.
“In most markets in the Mid-Atlantic, it is still a good time to be a seller, particularly those selling at the higher end of the market,” the Bright MLS report states. “However, the days of testing an inflated price are over, and sellers need to be realistic about pricing.”
