All signs are pointing towards a shift away from the tight sellers’ market we have been in for years towards one that gives buyers a little more negotiating power. Price growth has started to stall, inventory is on the increase and if you look at data from a variety of real estate tech firms, their data start to reflect similar trends. Redfin agents saw a large decrease in bidding wars for their clients, going from 61 percent in March of 2018 to only 16 percent for March of 2019; the ShowingIndex by the home showing booking firm ShowingTime indicates a slowdown; and according to Zillow, March 2019 was the 7th straight month of inventory gains which hasn’t happened since 2014. The biggest question on everyone’s mind is where the markets are slowing down the most so the good deals begin to surface before any of the other cities. There are two places to look first to get a sense of where the markets are heading.
The home trading platform Knock has released a list of cities they predict will have the highest number of current on-market listings sell below their asking price, along with the percentage of homes in that market they predict will sell under asking.
- Miami, FL: 89.65%
- Houston, TX: 82.74%
- New Orleans, LA: 82.64%
- Tampa, FL: 82.24%
- Jacksonville, FL: 81.96%
- Chicago, IL: 81.50%
- Phoenix, AZ: 80.33%
- Hartford, CT: 79.99%
- Orlando, FL: 79.57%
- St. Louis, MO: 78.40%
According to their report, they used machine learning to process 200 features across the top U.S. metropolitan areas to come up with these predictions. As with many real estate analyses there are always two tiers to the market that drive the data—the high-end and mid-price ranges. The fact that luxury-heavy Miami tops the list as having the largest percentage of homes that will sell under asking could be a reflection simply of the softening upper in the mid-level luxury range. The very upper echelon of the Miami market happened to have a strong first quarter already, with nine “mega-estate” sales finding buyers and homes in the upper ten percent price bracket seeing a median sales price of $10.1 million (largely due to the favorable tax rates).
The data released by Redfin on bidding wars also points toward where the best markets will be to find a deal. Here is the table from their report showing where bidding wars have decreased the most around the country.
Keep in mind these numbers come from their own client activity only and with Redfin’s varying market share in different cities around the country they are best taken as macro level trends comparing one year to the next. Yet it still shows many of those tech-strong markets which have been going gangbusters for so long are finally starting to see a slowdown. I doubt it can be called a course correction, those markets will have tech money pumping in to them for decades to come, so they will bounce back before too long. But for now, even though they are still some of the higher priced markets in the country, they could become good places to buy property as an investment that will pay off when the next influx of cash comes rushing in.
Me? I’m putting my money on Phoenix.