The tricky thing about buying real estate is that home prices can fluctuate. When they climb, that works against you, but when they drop, that could work out in your favor.
So where have home prices been declining the most on a national level? Property website Bayut, which connects buyers and sellers in the United Arab Emirates, did a deep dive into the U.S. real estate market to see which states could offer the best bargains for homeowners. Here's what it found.
States with the highest percentage of listings with price cuts
In 2018, these states had the highest average percentage of home listings whose prices dropped:
|State||Average Price Cut|
But keep in mind that while price cuts might seem to offer an opportunity to buy up homes on the cheap, it pays to delve into why home prices have declined in these states.
Illinois, for example, is plagued with financial problems on a statewide level. Its credit rating is the lowest of any state, and its recent history of financial mismanagement could be prompting residents to flee in hoards.
Arizona, meanwhile, has an unemployment rate that's higher than the national average. Higher sales and income taxes than average could also be driving residents out.
Furthermore, it's not surprising to see East Coast states like Connecticut and New Jersey make this list, both of which charge notoriously high property taxes (New Jersey actually has the highest in the country). Ever since the Tax Cuts and Jobs Act was implemented, homeowners who typically deduct state and local taxes have been limited to $10,000 thanks to a recently implemented cap. But in these states, property taxes alone can easily exceed that limit, which could explain why some sellers may be eager to unload their homes -- even if it means making concessions on price.
And let's also keep in mind that Washington, D.C. is an area that's generally in flux. The result? A less-than-stable housing market, which, right now, seems to be working to buyers' advantage.
Don't just look at price cuts
While targeting areas with home price cuts could be a good strategy for real estate investors, it's important to assess the big picture, too. It could be that some or all of the above housing markets were inflated for quite some time, and that this recent string of price cuts is really just an attempt to balance things out.
Furthermore, areas that aren't seeing a large percentage of housing price cuts could constitute a more solid, stable choice for long-term investors. Based on the aforementioned study, Vermont, Montana, Wyoming, Wisconsin, and New Hampshire have seen the lowest percentage of home price drops, so if you're in the market for new real estate and aren't set on a particular location, it pays to give these markets a look as well.
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