According to a new Zillow report, the share of homes sold above asking price declined each month in the second half of 2018. December recorded the biggest month-over-month drop since 2012, indicating another sign of the slowing housing market. The report also noted that 19 percent of home sales in the U.S. went for above asking price in December, down from 21 percent in November, and a peak of 24 percent in May.
"Last year marked an inflection point in the housing market. The first half of 2018 looked a lot like the previous three years with sellers firmly in control of the market and buyers outbidding each other for scarce inventory, pushing up prices," said Aaron Terrazas, Senior Economist at Zillow.
However, something shifted mid-summer, he noted. As sellers on the sidelines joined in, inventory rose and the balance of power began to swing marginally back toward buyers, particularly in higher-priced communities during the second half of the year.
The downward trend in December was widespread with eight of the 10 largest markets in the U.S. recording a drop from November levels with the exception of Philadelphia and Washington, D.C. Twenty-seven markets out of 35 saw a decline in the share of homes that sold above list, with Indianapolis recording the largest drop, where homes selling above list fell by nearly 13 percentage points. This was followed by San Francisco, down by 5.4 percentage points, still recording the second-highest share of homes sold above list price in December at 42.6 percent, exceeded by San Antonio at 44.3 percent.
San Francisco Bay Area and Silicon Valley remained the hottest housing region in the country in 2018, according to Zillow. Despite a steady slowdown since the beginning of 2018, San Jose, California (64.1 percent) and San Francisco (61.6 percent) had the highest share of home sales above asking price. Miami, Tampa Bay, and Pittsburgh were 2018’s coolest markets, the report found. Nearly 84 percent of homes in Miami sold for below their asking price last year, which was the highest share among top-35 markets since 2014.
Despite the slowdown during the back half of the year, the annual share of homes sold above list price still reflected an upward spike for the fourth consecutive year, though the pace is slowing. Nationally, 23.5 percent of homes sold above list price in 2018 compared to 22.7 percent in 2017. The median amount above asking that sellers realized fell from $7,000 to $6,830.
“With mortgage rates now back down, early data from the first month of 2019 suggest that it is still premature to call it a buyer's market. But more than any time in recent memory, it is important for sellers to be thoughtful in their listing strategy. Buyers are out there, but they're no longer fighting each other tooth and nail to get in the door," Terrazas said.
Read the full report here.