In some Sun Belt areas, nearly 1 in 5 sellers are asking for less than what they paid

The Boston real-estate market has seen a surge in for-sale listings this August, and prices are up. In other markets, prices are coming down - and some sellers are taking a loss on their home.

More local housing markets are beginning to crack.

The U.S. housing market has been in a slump all summer, with buyers finding little reason to jump in as home prices and home-loan rates remain elevated. Home sales nationally slumped in July, as mortgage rates surged on the back of tensions in the Middle East.

"Near-term leading indicators provide no sign that sales are likely to pick up in the months ahead, with mortgage purchase applications grinding lower and mortgage rates following long-dated Treasury yields higher," Oliver Allen, a senior U.S. economist at Pantheon Macroeconomics, wrote in a note following the release of July existing-home sales data.

"A significant housing-market recovery is unlikely," he added, "as long as monetary policy remains relatively tight, the labor market subdued, confidence depressed and population growth constrained by tighter immigration policies."

As the national market remains stagnant, a shift is underway in many local real-estate markets, signifying a major turning point. Until now, the Sun Belt has felt the brunt of America's housing affordability crisis, with many sellers forced to make steep price cuts to attract buyers.

Now, home sellers in other parts of the nation are also finding it increasingly hard to sell their properties as inventory climbs. Waning demand from buyers is in turn pressuring home prices down, and many homeowners in those regions are now selling at a loss, industry data indicate.

Seattle homeowners are rushing to sell this summer

This is partly because supply is suddenly surging in some areas. In early August, active for-sale listings in Seattle jumped 17% from a year prior, the biggest increase among the 50 most populous U.S. metro areas, according to Redfin data. Boston followed in second place, with a 14% jump in active listings.

Active listings refer to the total number of homes listed for sale in a market, regardless of how many days they've been there. New listings refer to homes that were recently put up for sale.

The median price of a home sold in Seattle at end of July was about $809,500; in Boston, it was about $782,600.

San Jose listings are seeing the biggest price drops

The jump in supply is having a big impact on prices in some places. For instance, in San Jose, Calif., which saw a 11.7% jump in new listings in August compared with a year prior, median sale prices were down 4.2%. That was the sharpest drop among the top 50 metro areas, according to Redfin data. The median price in San Jose was around $1.54 million.

Seattle home prices followed, with the city's median sale price falling 1.8% year over year.

To be sure, a surge in housing supply doesn't necessarily mean that home prices will fall. If there is sufficient demand from eager buyers looking to purchase, they may move quickly to grab those properties at asking price, which will then mean that prices won't drop as much. For example, despite a jump in for-sale listings in early August, prices in Boston were still rising, as seen in the chart above.

Nearly 1 in 5 homeowners in some Sun Belt cities are potentially selling at a loss

More than 4 in 10 Seattle sellers were cutting prices on their listings in mid-August, which was slightly higher than the national average, according to data from Parcl Labs, a real-estate data and analytics firm.

Additionally, nearly 9% of Seattle sellers listed their homes for less than what they paid for it, the firm added, which was higher than the national average of 6.6%.

Parcl Labs' data come from all for-sale inventory and are displayed on a real-estate data platform that launched on Aug. 1, Jason Lewris, the firm's co-founder, told MarketWatch. The data are updated daily.

The metro area that was seeing the highest share of sellers expecting to take a loss was Lakeland, Fla. About 46% of listings there had a price cut, and 18.4% of sellers listed their homes for less than what they paid for it.

Below is the full list of metro areas that have the highest share of home sellers listing their property for less than what they paid for it, according to Parcl Labs.

 
Metro                          Share of active listings where list price was below previous purchase price 
Lakeland, Fla.                 18.40% 
Panama City, Fla.              16.87% 
Colorado Springs, Colo.        16.17% 
Jacksonville, Fla.             15.13% 
Denver                         14.74% 
North Port, Fla.               14.33% 
Punta Gorda, Fla.              13.92% 
San Francisco                  13.11% 
Urban Honolulu, Hawaii         13.00% 
Portland, Ore.                 12.62% 
                                                                               Source: Parcl Labs, Parcl HQ 

Many of these markets, particularly in the Sun Belt, saw a big run-up in prices during the pandemic home-buying frenzy fueled by rock-bottom interest rates. Now they are seeing prices come back down from those highs.

Many of the markets where a bigger share of sellers are taking a loss are in the Sun Belt. The data indicate that many sellers are not waiting for a better environment to sell their homes, and are cashing in on what they can get and walking away.

D.C. home sellers are also willing to walk away with a loss

The nation's capital was also among the top places where a significant share of home sellers were selling at a loss.

Nearly 1 in 5 listings in Washington, D.C., were listed at a loss as of mid-August, according to Parcl Labs data. The data look at the District of Columbia alone, separate from the larger metro area that includes parts of Maryland and Virginia. (That's why the D.C. metro area is not on the list above.)

The share of home sellers in D.C. who were asking for less than what they paid was almost as high as the Lakeland metro area in Florida.

"What's happening in these markets that sellers want out badly enough to take a loss now rather than wait?" Parcl Labs' Lewris asked in a social-media post.

"D.C. condos are the toughest product to sell" right now, Justin Levitch, president of RLAH @properties, who is based in D.C., told MarketWatch.

Homeowners there are selling for a variety of reasons, he said - ranging from people looking for a bigger place for their growing families, to those leaving the city after losing their federal jobs. The Trump administration embarked on widespread cuts to federal agencies late last year that has impacted home sales in the capital.

Condo prices in D.C. haven't appreciated over the last five years either, Levitch said, so as the number of listings goes up and appreciation stalls, that creates a fragile environment for prices. When some sellers get desperate and cut prices to sell quickly, that brings down the value of other properties in the area or neighborhood.

Some home sellers can't sell because they cannot tolerate a huge loss. "It's very typical for a D.C. condo owner to rent their place ... and even rent it at a loss, because that's the best financial option," Levitch noted, because losing a few hundred dollars a month is preferable to losing tens of thousands of dollars in a sale.

Ultimately, in the medium to long term, "these condos will bounce back," Levitch said. "There's just too many of them right now."