Nearly 6 percent of today’s homesellers are at risk of selling for less than their purchase price — up from 4.4 percent a year ago, but still well below pre-pandemic levels, according to a new Redfin report.
Different parts of the country experience different risk, as do different home types. Providence, R.I., for example, has limited risk while San Fransico has about 20 percent of sellers at risk, according to the report. Condos are much more likely to be at risk of selling at a loss than single-family homes or townhouses.
In the early 2010s, following the global financial crisis, roughly half of for-sale homes were at risk of selling at a loss. Prior to the pandemic (early 2020) around 10 percent of for-sale homes were at risk of selling for less than their purchase price.
Redfin Senior Economist Asad Khan said the relatively small share of sellers facing a loss today is good news for buyers.
“We are seeing more opportunities for buyers to pay a little less than they would have just a year or two ago. That’s because sellers with significant equity in their homes — and therefore at no risk of selling at a loss — are more willing to be flexible on price,” he said. “That’s a meaningful shift for anyone who’s been watching and waiting for prices to come down, especially first-time homebuyers.”
Nearly 16.4 percent of today’s sellers who bought their home post-pandemic are at risk of selling for less than their purchase price. For comparison, 9 percent of today’s sellers who bought their home during the pandemic are at risk of selling at a loss, and just 1.8 percent of sellers who bought before the pandemic are at risk.
“The longer someone has owned their home, the more likely they are to come out ahead, but that’s little comfort for those who bought more recently and may be facing a loss,” Khan said. “Not every homeowner is listing because they want to — some are listing because they have to. In those cases, it’s important to list at a realistic price for the market and be prepared to adjust depending on buyer interest.”
Sellers who bought their home after the pandemic make up a sizable share of today’s sellers: 16.3 percent of the listings currently on the market were purchased after July 2022.
Homes that were purchased after the pandemic are more likely to sell at a loss for two main reasons, according to Redfin. First, sellers who bought post-pandemic paid high prices. Intense competition and record-low mortgage rates created a buying frenzy just after the pandemic began. Many homes sold for well above list price, a surge in demand that pushed home values to unprecedented highs by mid-2022.
Secondly, prices are softening. After peaking in mid-2022, prices have stabilized in much of the country as mortgage rates climbed and demand slowed. While some markets have remained resilient, others have seen values slip from their highs.
“Current sellers who bought their home after mid-2022 may have overextended themselves, thinking that prices were going to keep rising at similar rates,” Khan said. “Prices have kept ticking up since then, but at a slower pace — and now prices have started to fall in some parts of the country, especially in the Sun Belt. That means sellers are in a position where they may need to choose between accepting a lower price or taking the home off the market.”
Redfin’s analysis showed condos are significantly more likely to sell at a loss than other types. More than one in four (28.7 percent) for-sale condos bought after the pandemic surge are at risk of selling at a loss, the highest share among the different home types. Overall, nearly one in 10 (9.9 percent) for-sale condos are at risk of selling at a loss.
“We are seeing the biggest price drops in the condo market,” Denver Redfin Premier agent Andy Potarf said. “I had a seller who bought a condo for $570,000 in 2021 and it just sold for $525,000 last week. Sellers who have to sell are willing to take a bigger hit to get the deal done.”
Potarf added that condo sellers are in a particularly tough position because many face restrictions — from HOAs or local authorities — on how they can lease their properties.
“A lot of condo sellers have a choice to make: stay put, or take a loss,” he said.
In comparison, 4.4 percent of active single-family listings are at risk of selling at a loss, including 12.9 percent of homes bought after the pandemic and 7.9 percent of those bought during the pandemic.
Redfin is forecasting that home prices will fall 1 percent year-over-year by the end of 2025 because there are significantly more sellers than buyers in the market.
If prices do fall by 1 percent, the overall share of homes at risk of selling at a loss will increase to 6.4 percent. If prices fall by 3 percent, the share will increase to 8.1 percent. In the unlikely event prices fall by 5 percent, the share of homes at risk of selling at a loss will increase to 10.1 percent. Those who bought prior to the pandemic face minimal risk of selling at a loss, even if prices do fall by 5 percent.