Price reductions, according to a new report from Trulia, could be growing more and more infrequent as the housing market recovers.

By Peter Ricci

Heavy price reductions were one of the ugliest side effects of the housing downturn, but a new study by Trulia suggest that price reductions may be happening with fewer frequency as the housing market recovers.

According to Trulia’s study, which analyzed the prices of all non-foreclosure homes for sale on the website this month, 33.6 percent of the residences were priced lower than their original listing price, which is down from 36.7 percent in January 2012.

Post-Bubble Price Reductions – Fading Away?

As with most of these studies, the devil is ultimately in the details, and Trulia uncovered some monstrous variations across the nation’s local housing markets:

• Trulia compiled two separate lists – one featuring cities with the least price reductions and the other featuring cities with the most – and for the former list, California cities were well represented.
• Indeed, the Golden State took up seven of the 10 spots, with all the cities based in the South California/Bay Area region; Las Vegas, Miami and Fort Lauderdale were the other cities represented.
• By comparison, the cities with the most price reductions were concentrated in the Northeast and Midwest.
• And how did the price reduction scenario differ across those areas? Oakland, which came in at number one, has had only 15 percent of its properties’ prices reduces, whereas Springfield, Massachusetts saw price reductions for 48 percent of its properties.

What Creates  a Price Reduction Haven?

In his analysis accompanying the study, Jed Kolko, Trulia’s chief economist, said that two factors explained the geographical difference in price reductions: price gains and lower vacancy rates. In the cities with the fewest price reductions, Kolko said, vacancy rates are generally lower, and with buyers competing with one another for the few remaining properties, sellers have less incentive to decrease their prices – and in some cases, are even increasing their prices.

And although Houston was not included in Trulia’s list, many of its markets feature those same characteristics, something that Sandra Billings, the broker/owner of the Billings Group in Northwest Houston, can attest to.

For her market’s lower-priced properties, Billings said that multiple offer situations are quite common, and with housing inventory as low as it is in Houston (just a 3.7-months supply, by HAR’s latest measure), price reductions have all but vanished.

“Inventory is so low, I’m seeing [price reductions less and less],” Billings said.