Seattle Home Prices Aren’t Declining, But Headlines Might Make You Think They Are

If you’ve come across recent headlines about home sellers reducing prices, it’s a prime example of how news can create more fear than understanding. Here’s the real situation with home prices.

The bottom line is that home prices are higher than they were a year ago, and they are expected to continue rising, just at a slower pace.

But a recent article from Redfin notes,

“Price Drops Hit Highest Level in 18 Months As High Rates Dampen Buyer Demand.”

And that might make you think prices are declining.

While it’s true that the latest report from Realtor.com shows that 16.6% of homes on the market had price reductions in May, up from 12.7% last May, this doesn’t mean that overall home prices are falling.

The key is knowing the difference between the asking price and the sold price.

Understanding Asking Price vs. Sold Price

Based on market factors and the offers a seller receives, the asking price can change. If a seller isn’t attracting much interest, they might revise the price to reignite interest in the home, often because it was overpriced initially. This leads to price reductions, and when you see “price drops” in a headline, it may sound like overall home prices are declining.

Mike Simonsen, CEO and Founder of Altos Research, says:

“Not only is the share of homes with price cuts elevated compared to one year ago, but more price cuts are happening each week than last year.”

Here’s the most important thing to note: Actual sold prices are still rising, and they’re expected to continue to do so at least over the next 5 years.

What Does This Mean for Home Prices?

So, while there’s been an increase in price reductions recently, this doesn’t mean overall home values are declining. Instead, it indicates that demand is stabilizing, leading sellers to adjust their expectations to match the current market conditions.

Despite more instances of price reductions, home values continue to grow annually, a trend typical in the housing market nearly every year. According to the Federal Housing Finance Agency (FHFA), home prices went up 6.6% over the last year (see below):

This map shows how prices rose just about everywhere in the country, indicating the market is not in decline.

Therefore, while reductions in seller prices often signal that prices may moderate in the coming months, as experts have predicted for some time, they should not necessarily be cause for alarm. The same article from Redfin also states:

“. . .those metrics suggest sale-price growth could soften in the coming months as persistently high mortgage rates turn off homebuyers. For now, the median-home sale price is up 4.3% year over year to another record high. . .”

Given the current tight inventory, price moderation is far more probable in the coming months than outright price declines.

Why This Is Good News for Buyers and Sellers

For buyers, more realistic asking prices offer a greater opportunity to secure a home at a fair price. This also instills confidence when entering the market, knowing that prices are stabilizing rather than escalating rapidly.

For sellers, recognizing the importance of adjusting their asking price can result in quicker sales and fewer negotiations over price. Starting with a realistic price can attract more committed buyers and facilitate smoother transactions.

Bottom Line

While the increase in price reductions may appear concerning, it’s not a reason for alarm. It indicates a market that is adapting to evolving conditions. Home prices are still increasing, albeit at a more measured pace.