A Zillow® report, published yesterday, says home buyers are currently enjoying record discounts on homes. In October, sale prices were on average $25,000 lower than original listing prices, often as a cumulative result of multiple smaller cuts.
As always with home price news, it's important to recognize that property markets are hyperlocal. Some states, counties, cities, neighborhoods, streets and even individual homes can defy larger trends, and prices may still be rising in those exceptional places.
Causes of Stalled Home Prices
Why are home price rises moderating? "Rising inventory and dwindling demand have brought down home prices in many U.S. metropolitan areas this year, especially in those markets in the Sunbelt and the South which became overheated between 2020 and 2022," said Newsweek on Tuesday.
Nationally, home prices may not have actually fallen this year but they are plateauing after sharp rises earlier in the decade. Check out the Federal Reserve Bank of St. Louis' chart of median sales prices of houses sold to see the dramatic change.
Discounts on Both New and Existing Homes
Most homes are sold by owner-occupiers, people who own and live in the property they're selling. But plenty are newly built homes that are being sold by developers. Both groups of sellers face similar problems.
In August, we published, "New Homes Now Cost Less Than Existing Ones." And, on Saturday, Apollo Global Management confirmed that remains the case.
"For the first time in more than 50 years, the price of a new single-family home is lower than the average price of an existing single-family home, wrote Dr. Torsten Sløk, Apollo's chief economist. "The downward pressure on new home prices is driven by homebuilders producing smaller homes and providing incentives to homebuyers in a market where affordability is a challenge."
Sløk is right that homebuilders are cutting prices by reducing the sizes of the homes they sell. But that's not enough to maintain demand.
"[Builders] have tried to use sweeteners to shift inventory," reported The Wall Street Journal earlier this month. "D.R. Horton, which builds roughly one in every seven new homes in the U.S. and has its own financing arm, is offering 3.99% mortgages to buyers. The company has also knocked 3% off its average selling price over the past 12 months and expects to cut prices further in its 2026 fiscal year, which runs through September." Other builders are similarly incentivizing buyers, says The Journal.
And that's true. Last month, The Miami Herald said, "According to the National Association of Home Builders’ latest tally, two-thirds of builders everywhere were offering some kind of incentive in August. For the most part, they are throwing in free upgrades, helping with closing costs, discounting prices or buying down their buyers’ mortgage rates."
If you dream of owning a new home, now might be the moment to check out builders' offers near where you want to buy.
Where the Biggest Discounts Are to Be Found
In dollar terms, the biggest discounts are occurring where home prices are highest, says Zillow, referring to existing homes. That's in places such as San Jose ($70,900 average discount), Los Angeles ($61,000), San Francisco ($59,001), New York ($50,000) and San Diego ($50,000).
However, as percentages of the listing price, the biggest discounts are often to be found in markets with more modest home values. "In Pittsburgh, for example, a typical markdown of $20,000 equals about 9% of the metro’s typical home value — the largest relative discount among major markets," reports Zillow. "New Orleans homes are also typically discounted by 9% of the metro’s typical home value, with buyers in Austin (8.4%), Houston (8.2%) and San Antonio (7.9%) seeing the next-best deals."
Of course, some major markets are hardly discounting at all. Oklahoma City, Louisville, St. Louis, Indianapolis and Detroit had the smallest cumulative discounts in October, according to Zillow.
The Future Is Murky
Will markets normalize soon? Most homeowners hope so.
But at least one housing expert doubts that markets will get back to normal anytime soon. Newsweek quoted analyst Melody Wright, who expects home prices to soon drop by 50%. You can watch her video interview with Adam Taggart, host of Thoughtful Money, on YouTube.
Most experts don't agree with Wright, and instead think predictions of 50% drops are clickbait. Indeed, none we've read shares her view. And holding off from buying a property while home buyers wait to see if her prediction comes true could be a risky strategy. Home prices could start rising again while everyone waits for the crash.
One thing is for sure: Comparitive to a few years ago, there are many bargains waiting for buyers right now.
