Where Houses Are Trading For Under List Price (And What That Means For CRE)

As mortgage rates tick up and consumers’ purchasing power curtailed by rising inflation, homeownership remains increasingly out of reach for many Americans. But in many markets, houses are still trading for more than their list price.

That’s not the case in a few key areas — namely West Virginia, Illinois, and Oklahoma.  A recent study by RubyHome looked at historical Zillow data from the past 12 months for homes that sold at a different amount than the list price. Analysts then averaged out the sales-to-list ratios of these properties for each state to see where homes were selling at the lowest compared to their original listing.

West Virginia topped the list with the lowest sales-to-list ratio: on average, homes there sold at 97.28% of the original list price. Within West Virginia, Parkersburg had the lowest sales-to-list ratio, at just 96.22%, followed by Huntington at 97.37% and Charleston at 98.26%.

Illinois came in second with an average sales-to-list ratio of 97.57%. Within the state, Danville had the lowest ratio with 95.07%, followed by Pontiac at 95.42 and Charleston at 95.45%. Oklahoma was third, with an average sales-to-list ratio of 98.07% led by the cities of McAlester (96.28%),  Elk City (96.44%) and Ardmore (96.56%).

Michael J. Romer, Managing Partner of NYC real estate law firm Romer Debbas, previously told GlobeSt.com that low inventory, increased demand, record low mortgage rates, record high inflation, and remote work all artificially increased home prices in many regions of the US.

“It was just a matter of time before the tide would turn and, in some areas, it certainly has,” Romer said.

The average days-on-market metric is also increasing for many states: according to another analysis of Zillow data by online bank Tangerine.ca, homes in New York state take the longest amount of time to sell at an average of 130 days to fully close.  Hawaii was second on Tangerine.ca’s list, followed by New Jersey, West Virginia and North Dakota.

The rising costs of homeownership, as well as continued inflation will likely continue to drive interest in the multifamily market.

“The demand will remain high as home ownership costs rise,” Dianne Crocker, a principal analyst at LightBox, said last month at GlobeSt’s annual Women of Influence event. “Home prices rose 20% in April, along with higher borrowing costs, putting ownership out of the hands of new buyers. Driven by huge population base coming into the renter market, coupled with housing shortage especially in new migration markets. National rents are up about 17% in the last 12 months.”

Marcus & Millichap’s John Chang predicts investors will increasingly turn to a buy-and-hold strategy for multifamily properties, adding that “over the short term, until a lot more housing units are built and housing supply and demand move back toward balance, apartment demand will remain very strong…Apartment rents are much more affordable than homeownership right now.”