15 Cities Seeing the Biggest Home-Price Cuts

• Numerous major metros are witnessing higher average price cuts on homes listed for sale.
• The consultant Nicholas Gerli says this trend predicts market softening and increased inventory.
• Using Gerli’s method, Insider identified the top 15 US cities with real-estate price corrections.

Mounting fears of a housing crash have been keeping real-estate investors and regular homebuyers awake at night.

The US real-estate market has become overheated in the past few years, as high demand from first-time homebuyers and competition with investors have consistently overwhelmed a housing-supply deficit. Since spring 2020, median home prices have surged almost 27%, according to data from the US Census Bureau and the Department of Housing and Urban Development.

Remote workers migrating from major metropolitan areas to lower-cost hot spots have been additional kindling in the fire, bringing their higher incomes and savings to smaller markets and causing miniature bubbles in cities such as Nashville, Tennessee; Atlanta; and Columbus, Ohio. And as mortgage rates continue to climb, experts have increasingly warned of particularly overvalued properties in more tertiary markets such as Boise, Idaho; Ogden, Utah; and Spokane, Washington.

Now, the question du jour is whether this momentum will continue or whether the US housing bubble will burst in spectacular fashion. While the 2008 housing crash, which triggered the a global financial crisis leading to the Great

Recession

, is still fresh in the minds of many homeowners, the general feeling is that the market is in a different place today thanks to changes in lending practices and standards.

Signs of softening

Nicholas Gerli, the CEO of the real-estate data analytics firm Reventure Consulting, believes that we may have seen the peak in particularly bubbly markets and that asking prices may start returning to earth.

In a recent YouTube video, Gerli mentioned a rise in the price cuts of homes on the market as a sign of overvaluation or fatigue from buyers. Specifically, he highlighted a house on Long Island, New York, that had its price cut by 8% to $972,000 from $1,054,000 after a mere two weeks on the market — leaving it with an even lower price than the property’s asking price from 2017. And there are certainly many other sellers in that market readjusting prices to stay competitive.

“If sellers are increasing the amount that they’re cutting the price of their home, that is a sign that they’re getting desperate and wanting to bail out of the housing market before it crashes,” Gerli said in the video. “This is a trend that’s occurring in certain markets, more than others, as one of the early warning signs of a housing crash.”

That’s because historically, a rise in the average number of price cuts — and the bigger the dollar amount in those price cuts — in a particular metro area indicates that that market is starting to soften, Gerli said. For instance, in Boise, which he called the US’s “biggest housing bubble” closest to crashing, the average price cut has consistently been climbing, indicating a flurry of sellers trying to unload their properties before a bubble bursts.

But the so-called seller desperation, as Gerli refers to it, might stem from two reasons.

First of all, sellers could simply be trying to list at what is presumed to be the top of the market before an overly inflated housing market corrects itself. But the haste to cut prices could also be due to an influx of new inventory earlier this year, since rising home supply pressures sellers to lower prices, ultimately improving a market’s competitiveness.

In conjunction, these factors might indicate that overheated markets are finally cooling off enough to return back to normal.

“Just because a market’s having a big increase in the value of price cuts and a big increase in seller desperation does not mean it’s going to have a major crash in the long run,” Gerli emphasized. “It just means that in the short term we’re seeing softening.”

To truly predict a housing correction versus a crash, Gerli advised analyzing fundamentals like an area’s job growth versus homebuilding rate, its three-year appreciation rate versus historical norms, and a property’s value-to-earnings ratio, which informs affordability.

Utilizing data from Zillow, Insider followed Gerli’s methodology to identify the 15 markets in the US with the largest increases between their March 2022 and March 2021 price cuts. New York leads the pack of potentially cooling markets, which are listed below in decreasing order of average price cuts.

In these areas, Gerli said, “it’s a good bet to see more inventory and more price cuts into the future.”