Phoenix is one of the many Sun Belt cities where housing markets have taken a big hit during the recent real estate bust, with residential prices down nearly 45% since 2006. That, plus high foreclosure and vacancy rates, make for a dismal market for sellers. For homebuyers, of course, it's a very different story, both in Phoenix and in the many other cities that have followed similar patterns.
We created a list of the U.S. cities with the biggest home price discounts. We compiled this list using the newly launched quarterly Home Offer Report from Trulia.com, a San Francisco-based real estate listing site. Trulia evaluated price cuts in America's 50 largest cities, as defined by the U.S. Office of Management and Budget. The Trulia folks scoured nonforeclosure residential listing data for all of these cities in the year through March 31, 2011. They tracked prices for single-family homes, townhouses, condos and apartments. The listing information itself came from real estate brokers, agents, third-party aggregators and Multiple Listing Services that participate on the Trulia.com platform.
The quarterly Home Offer Report, which also provides users with interactive mapping, broke down price cuts on the basis of four metrics: average number of days on the market before first price reductions; average discount during the price-cut period; probability of a second price cut; and the total percentage of for-sale properties of which prices have been reduced at least once.
Forbes took the data and ranked 50 cities to find the ones with the most dramatic overall price reduction activity.
Arizona clearly did not fare well, in part because of the double-whammy of a high likelihood that already struggling housing markets will face a second round of price cuts before properties move. Second behind Phoenix at the top of our list was its neighbor to the south, Mesa, Ariz., which is broken out as a separate geographic area in this report. The Copper State's second largest city,Tucson, placed 10th.
Among all homes for sale in Phoenix, 35% had their prices cut at least once since going on the sale block, and 56% faced the likelihood of further cuts. The average Phoenix home has been sitting at the original sale price prior to that cut a short 48 days. That's a stark contrast to rebounding markets. In relatively robust New York City, for example, property prices had been cut a mere 6% after 80 days on the market.
"When you look at Mesa and Phoenix, there are so many foreclosures that sellers have to compete with," explains Daisy Kong, a manager at Trulia.com.
With distressed properties selling for anywhere from a 15% to 50% discount, sellers of nonforeclosed homes are forced to offer price cuts to compete. Hence Las Vegas, the nation's foreclosure capital, with more than 26,000 foreclosure filings currently on the books, made our list at number seven. Home sellers in Vegas gambled with higher list prices only a short time, slashing values after 54 days on average, with the likelihood of a second chop at 48%.
"Sellers are actually pricing their homes much lower to start now," explains Kong. "There's not the disconnect [between asking and offering prices] that was there this past year."