Price Cuts are Less Frequent in 2021, but also Deeper, Faster — and Sometimes More Profitable
**Just 8.5% of homes listed for sale on Zillow in March had experienced at least one published price cut, down from 12.2% in March 2020.
**In January, the typical home nationwide was on the market for 25 days before its price was cut. This initial listing period gives buyers time to discover a home and evaluate if they’re willing to pay the upfront asking price, and sellers time to determine if their initial ask was on or off target.
**Homes are also selling faster after a price cut than they were in prior years. Nationwide in January, the typical for-sale listing that had a price cut generally accepted an offer and went pending after 19 days, down from 25 in 2020.
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The share of home sellers opting to cut their initial list price has fallen by roughly a third over the past year. But those that are lowering their price are making deeper cuts, more quickly — and often selling faster and for more money when they do.
In the current sellers’ market — with limited inventory, high housing demand, rapidly growing home values and shrinking time on market for sold homes — sellers may not feel compelled to cut their initial asking prices at the same rate as years past. Just 8.5% of homes listed for sale on Zillow in March had experienced at least one published price cut, down from 12.2% in March 2020. But a Zillow analysis of homes with a price cut shows that a smart approach to determining if, when and by how much to cut a listing price can be a successful selling strategy.
In general, price cuts are rare within the first three weeks a home is on the market — in January, the typical home nationwide was on the market for 25 days before its price was cut. This initial listing period gives buyers time to discover a home and evaluate if they’re willing to pay the upfront asking price, and sellers time to determine if their initial ask was on or off target. But once those first few weeks are up, sellers this year were less-reluctant to begin cutting their prices down — in January, sellers typically cut their price 4 days earlier when compared to January 2020. Among the top 50 metros, prices were cut fastest in January in Salt Lake City (typically after 15 days on market) and slowest in Miami (35 days).
Homes are also selling faster after a price cut than they were in prior years. Nationwide in January, the typical for-sale listing that had a price cut generally accepted an offer and went pending after 19 days, down from 25 in 2020. In metros including Cincinnati, Columbus, Kansas City and Salt Lake City, sold homes with a price cut went pending within 7-to-9 days, 4-6 days sooner than January 2020 in each case. On the other hand, listing status change from for-sale to pending for homes with price cuts is much longer (41 days) in both expensive metros like New York and fast-growing markets like Nashville, though still down from prior years.
And rather than opting for multiple price cuts, sellers this year are making fewer, but larger price cuts — the typical first price cut represented 3.3% of the home’s asking price in January, up from 3.1% in the same month a year ago. And homes with a price cut typically experienced just one price cut before selling, down from two in prior years. But on net, with fewer and larger cuts, the total price cut represented similar shares of the initial listing price — in January, the fewer cuts cumulatively represented 13.4% of the initial list price, similar to 13.3% previously.
In more-affordable regions including the Midwest and markets like Cleveland and Cincinnati, price cuts are generally more common among the least-expensive homes. This may be because in some of these fast-appreciating markets where entry-level homes are in high demand, sellers may be overvaluing their homes in expectation of outsized gains, and pricing too aggressively. As a result, discounts are also higher among these more-affordable homes. In Cleveland, for example, the typical price cut represented 6.9% of the initial asking price for the least-expensive homes, compared to just 4.4% for the most-expensive homes. The opposite is true in generally more-expensive, coastal metros including New York, Seattle and San Francisco, where price cuts are steeper among the areas’ more-expensive homes.
But in the end, sometimes a seller has to first go down in order to come back up, and in many cases price cuts do not necessarily mean sellers ultimately lose out on their initial asking price. In general, when the first price cut is between 15 and 30 days of a home first hitting the market, sellers can expect to sell approximately $15,000 above the asking price. In fast-growing midwestern markets, homes with a price cut 15-30 days after list generally end up selling for more than $20,000 above the initial asking price. In these cases, it seems a price cut can be a strategy to spur more interest in a home, and interest spurs competition — which ultimately pushes prices up.