Sellers are out of sync with buyers on pricing
Years of rapid home price growth have trained sellers to price high, but the market has shifted, leading to a widening gap between seller asks and buyer offers.
For some home sellers, hope springs eternal.
Although recent data suggests the housing market is becoming more balanced — or even favoring buyers — home sellers have been slow to adapt, asking for more than buyers are willing to pay.
A new report from Redfin found that the gap between list prices and sale prices has been increasing since January, and in March reached nearly $40,000 — the widest it has been since 2020. The median ask price last month was $469,729, based on Redfin's analysis of MLS data, while the median sale price was $431,057, a difference of 9%.
Price growth slowing: Recent estimates of annual home sale price growth range from 2.5% (Altos Research, based on pending sale prices in April) to 2.7% (NAR, based on completed sales in March).
List prices, on the other hand, were up 6.2% year-over-year in March, Redfin found — suggesting "a growing disconnect between what sellers think they can get for their homes and the direction the market is actually moving," Redfin Senior Economist Elijah de la Campa said in a separate April report highlighting the slow pace of sales.
Living in the past? Sellers may also be pricing too high because they're focused on old data. Home sale prices were up 4.8% in the last three months of 2024 and into January, according to NAR, but have since fallen as buyer demand has waned. And that's a difficult reality for some sellers to face after years of strong price growth.
"A lot of sellers are bringing up comps from a year ago, and I have to tell them that's no longer the environment we're in," Redfin agent Chaley McVay noted in the latest report. "The most important thing you can do as a seller right now is fairly price your home. If you overprice, chances are you'll get no activity."
That mirrors the advice of Chen Zhao, Redfin's economic research lead. Given the shifting market, Zhao said, "you may need to price lower than your initial instinct to sell quickly and avoid giving concessions."
Optimistic about offers: A March survey by Realtor.com suggests that sellers may have trouble suppressing that instinct. The vast majority of potential sellers surveyed — 81% — said they expect to get their asking price or more when they decide to list their home.
Yet Zillow's latest housing report found that 23% of listings received a price cut in March — the highest share on record for any March since 2018 — indicating that the original asking price was too high.
If the market remains on its current trajectory, sellers looking for a speedy sale may have to price lower than they'd like — or be willing to reduce prices later if buyers aren't biting.
Where price gaps are widest: Home prices have cooled in Florida this year, and nearly half of the 42 U.S. metros with year-over-year price declines in February were located in the Sunshine State. But sellers are still pricing high in some of those cities.
Among the 50 metros in Redfin's report, two of the top five cities with the largest price gaps were in Florida. West Palm Beach came in at No. 1, with median listing prices up 9.3% but sale prices down 0.3%. Jacksonville ranked fifth with listing prices up a modest 2.3% but still out of sync with sale prices, which were down 3.8% — the largest drop of any metro analyzed.
Rounding out the top five were Pittsburgh, Cincinnati and Atlanta, with price gaps ranging from 6.3 to 7.9 percentage points.