Market conditions are changing rapidly. Buyers are pulling back in the face of rising mortgage rates and economic uncertainty. Gone are the days of multiple bidders and offers tens or hundreds of thousands of dollars over list price. While inventory remains relatively low, buyers are discovering they have more leverage than they have had in years. Sellers have to be more strategic to attract interest from a shrinking buyer pool.

In response to the new market environment, many sellers are realizing that they need to adjust their price expectations. But it is a slow process for some sellers, who have watched home prices run up at double-digit rates for the past two years. They may not be happy about it, but more and more sellers are dropping their asking price to find a buyer.

Some Sellers Are Still Overreaching on Price Initially

Overall, about 40% of sellers in the Mid-Atlantic who have an active listing have lowered their list price. But many are taking their time to adjust to new market conditions. Among properties active on the market the first full week of October, only 1% of sellers had dropped their price in the first week. Some sellers are still committed to pricing their home aggressively and are testing the waters. About 8% of homes on the market between 7 and 13 days dropped their list price.

However, the big realization for sellers seems to come once their home has been on the market for 2 weeks or more. Of the properties on the market between 2 and 3 weeks, more than 1 out of 5 (21.5%) had dropped in price. And the share increases steadily—and not surprisingly—as homes stay on the market longer. Among all properties active across the Bright footprint during the first full week of October, 54% of those on the market for 31 days or longer had seen a price drop.
 

Sellers Are Not Making Dramatic Price Cuts . . . at First

On average, sellers with properties currently on the market who have dropped their price reduced their original list price by an average of 7%. So, for a home originally listed at $350,000, the price drop would mean a new list price of $325,500, or a $24,500 drop. But many sellers are reducing their asking price by much less, particularly when their home has been listed for less than a month.

For example, homes listed for less than a week had an average price drop of 3.7%. When homes were on the market for between 1 week and 1 month, sellers were cutting prices by around 4% to 5%, on average. Among properties on the market for more than a month, the average price drop was 7.7%.
 

Price Adjustments Are Happening Differently in Different Market Segments

Among current active listings, sellers of higher-priced or luxury homes seem to be less likely to drop their asking price—at least for now. Sellers with listed homes priced below $1 million cut their asking price about 40% of the time. However, only 28.9% of homes listed at $1 million or above dropped in price.

When sellers of higher-priced homes do drop their price, they tend to cut by more than average. Among homes priced at $1 million or higher, the typical drop in asking price was 8.4%. But among current active listings, the steepest reductions are actually among the lowest-priced listings. The average price reduction for homes in the under-$250,000 price tier was 10.5%.
 

Impacts of New Pricing Environment

As the housing market continues to cool, sellers will have to reset their price expectations to attract offers. Sellers who price their home appropriately—with assistance from a real estate professional who has knowledge of the local market—can still find a ready buyer, even in this challenging market.

Ultimately, as these price adjustments become more widespread, it is likely that we will see median home sales prices come down from their peak levels. However, even if that happens, home prices will still be between 20% and 40% higher than they were back in 2019.

Stay informed about housing market conditions with Bright’s housing market reports and get a preview of future buyer activity by tracking the Bright MLS T3 Home Demand Index for the Philadelphia, Baltimore, and Washington DC regions.

Dr. Lisa Sturtevant serves Bright MLS as the nation’s only MLS-focused economist. She leads research, reporting and insights from Bright’s comprehensive array of real estate data. In 2021, Bright’s over 100,000 subscribers facilitated $142B in real estate transactions through its system stretching across 6 states and the District of Columbia.