As the U.S. housing market appears to finally be cooling somewhat, some buyers are breathing a sigh of relief. Home sellers are frantically entering the market, hoping to take advantage of the remnants of the pricing boom.
For the four weeks ending on May 22, almost 1 in 5 sellers dropped the price of their home. It’s the highest rate since 2019. During the same four-week period, there were 13% fewer “homes for sale” searches on Google, and there was a 12% year-over-year decline in tours and related services from agents on Redfin.
Sellers are still asking a premium for homes, with the median asking price up 17.8% year-over-year. However, sellers are also starting to see the writing on the wall as buyers are more cost-conscious with rising interest rates. Thus the price drops.
If you’re a seller with a home on the market, how do you know it’s time to lower the price?
Price Is Usually the Reason Your Home Is Still On the Market
If your home has been on the market for a while and it’s not getting the attention you think it should, or you’re not getting offers, it’s frustrating. More often than not, according to real estate professionals, the issue is the price.
Buyers can overlook many other factors if they feel like the price is right.
Some of the signs your price might be too high include getting little traffic and no offers. You might also get good traffic, but the offers you’re getting are a lowball. A third sign of thinking about having good traffic but negative reactions from potential buyers. If buyers consistently make comments about the price, it might be time to pay attention to what they’re saying.
When To Lower the Price
If you think you should reduce the price of your home, you should do it quickly. Usually, within two weeks of initially putting it on the market is ideal, especially with inventory remaining low. As a rule, you’ll see the most activity within the first 21 days of your home going on the market, so make sure you’re taking advantage.
You’ll also want to look at some of the indicators in the housing market where you are, like the average days on the market.
One guideline that some real estate pros recommend is a price adjustment after a house is on the market for ten days.
There are marketing steps your realtor should take before a price reduction. For example, maybe they need to revisit your photos and ensure they’re good enough. The home also needs to be listed in multiple places, and you should address buyer feedback.
What to Know About Price Cuts
No one wants to make a price reduction, but the reality is that you may even have to do it more than once. The more your days on the market go up your potential need for price adjustments increases.
It’s advisable to make no more than three price reductions. If you go beyond that, it will start to become a red flag to buyers.
You also want to be careful and strategic in how much you reduce the price. For example, if you priced high to start with, maybe you reduce it by around 4% to no more than 9%. If your initial price was comparable to market value, you might need an incremental cut.
Some real estate agents think it’s better to go ahead and reduce your home by a significant enough amount initially, so you don’t have to do it more than once. That’s something to talk to your agent about. There is the potential that multiple smaller cuts are just dragging out the process of selling your home, which isn’t what you want.