NEW YORK - Fewer U.S. home sellers cut listing prices on their homes for a second straight month in December as buyers rush to beat rising interest rates and an expiring tax credit, real estate website Trulia.com said on Tuesday.
Prices on 21 percent of homes on the market as of January 1 were sliced at least once, down from 22 percent the prior month and from 25.6 percent two months earlier.
The share of sellers reducing their asking prices has fallen to the lowest level since San Francisco-based Trulia started tracking reductions in April 2009.
The average discount for price-reduced homes was unchanged from the prior month at 11 percent off the original price.
If you are a qualified buyer in a secure job, now is a good time to enter the market, Trulia Chief Executive Pete Flint told Reuters. Historically low borrowing costs and the tax credit incentives are the ultimate price reductions for home buyers.
But both are fleeting.
Average 30-year mortgage rates jumped from a record low 4.71 percent early in December to end the year at 5.14 percent, according to home funding company Freddie Mac (FRE.N). The rate slipped in the first week of this year but is seen nearing 6 percent later in 2010.
With rates still relatively low and tax credits in play, home sellers cut $21.2 billion from asking prices, down 14 percent from $24.7 billion the prior month and from $28.1 billion two months ago.
Buyers looking to lock in the $8,000 first-time buyer tax credit or $6,500 move-up buyer credit need to sign contracts by April 30 and close loans by the end of June.
Sellers likely face the prospect of asking still less for their homes as those incentives disappear and borrowing costs rise.
I expect reductions to rise again as the tax credit extension deadline approaches but I also expect mortgage rates to rise, so they may cancel out the savings from list price reductions, Flint said.
On a national level, I expect the industry to be on a roller coaster for 2010 and hopefully see some stability in 2011, he added.
Despite some signs of improvement, 10 percent of the work force remains unemployed, clouding the outlook for housing recovery.
INVENTORY DOWN FOR SECOND MONTH
Inventory of single-family homes and condos offered fell for the second straight month, lessening the urgency for sellers to cut prices to lure buyers.
Total listings fell by 4 percent in the latest month after a 9 percent downturn, Trulia said.
Just seven major cities have had average price cuts of 30 percent or more from their original asking prices as of January 1, half the amount of the prior month, Trulia said.
The inventory of homes for sale is still a big wild card in housing, however. Many industry experts expect another wave of foreclosures this year to keep pressuring home prices.
Price cuts were fairly evenly disbursed regionally in the latest month.
Twenty percent of listings in the South had price cuts, while reductions were 22 percent in the West, Midwest and the Northeast.
The luxury market continues to pay a heavy price. Homes listed at $2 million or more cut prices by an average of 15 percent from the original price, the most since Trulia started tracking this last April. These houses represent less than 2 percent of all current listings on Trulia, but account for 24 percent of the $21.2 billion in home price reductions.
(Editing by Dan Grebler)