The share of U.S. home sellers reducing their asking prices reached 20.8 percent in September, the highest level since 2018, according to Realtor.com’s monthly housing report. This marks a 0.9 percentage point increase from a year earlier and the highest price-cut share for any month since October 2022.
Mortgage rates climbed to an average of 7.03 percent in late September, up from 6.66 percent in August and 6.30 percent a year prior, according to Freddie Mac. Realtor.com senior economist Jake Krimmel noted that elevated borrowing costs and geopolitical uncertainty have dampened buyer demand, contributing to a 4.1 percent year-over-year decline in pending home sales in September. Active listings rose 5.4 percent annually to about 1.16 million homes, though inventory remains 9.1 percent below pre-pandemic levels.
Vacation Home Sellers Face Steep Discounts Amid Market Shift
Vacation properties, once a lucrative investment during the pandemic-era housing boom, are now seeing significant price reductions. A two-bedroom cabin in Gatlinburg, Tennessee, listed at $850,000 in January 2024, has undergone multiple price cuts and now asks for under $600,000, a nearly 30 percent reduction. Similarly, a four-bedroom home in Big Bear Lake, California, has been listed at $1.3 million since June without a sale.
The short-term rental market’s plateauing demand and higher borrowing costs have pressured second-home owners, with research firm Parcl Labs labeling vacation-home sellers as “the most motivated in housing.” While many properties still exceed 2019 values, the rapid price adjustments reflect shifting market dynamics.
Market Forces Driving Price Reductions
The rise in mortgage rates has directly impacted affordability. Realtor.com estimates that a half-percentage-point increase in rates can reduce a buyer’s purchasing power by roughly $30,000 for those with a $2,000 monthly principal-and-interest budget. The decline in pending sales—down 6.2 percent from August—signals weakening buyer activity, despite growing inventory.
Analysts attribute the slowdown to a combination of higher financing costs, seasonal demand lulls, and economic uncertainty. Krimmel stated that the housing market’s typical fall slowdown arrived earlier this year due to these factors.
Vacation Home Market Adjusts to New Realities
The vacation-home sector, which saw explosive growth during the pandemic, is now grappling with lower rental demand and higher carrying costs. Investors and part-time owners are reassessing the viability of second homes, leading to six-figure price cuts in competitive markets like Gatlinburg and Big Bear Lake.
While some sellers remain profitable compared to pre-2020 levels, the pace of transactions has slowed. Real estate agents report that properties are lingering on the market longer, with multiple relistings and aggressive markdowns becoming common. The trend underscores broader shifts in housing preferences and economic conditions affecting discretionary real estate investments.