New research found that the U.S. median home listing price slipped 0.9% annually in June, posting the first yearly decline since 2017, the start of Realtor.com [1]'s trends data, according to its June Monthly Housing Trends Report [2].
At the same time, while home shoppers had more homes to choose from this month, improvement stalled as the active inventory growth rate slowed for the fourth month in a row (+7.1%) and came in well below May's rate increase of 21.5%.
"While home asking prices grew seasonally, price gains have been weakening since last summer as rising mortgage rates have added to ongoing affordability challenges and further cooled buyer demand, so the first year-over-year decline in median list prices this month wasn't unexpected. While this could feel like a welcome relief for buyers, our revised 2023 outlook [3] expects only a modest drop in home prices of 0.6% for the year. This may not be enough to noticeably bring down costs until the end of the year as inflation and rates start to fall too," said Danielle Hale, Chief Economist for Realtor.com. "Fewer potential sellers opting to list their home because of the mortgage rate lock-in effect continues to be a drag on the market. Fortunately, for those willing to make a move, falling prices won't erase the substantial price gains seen the past few years, and most will likely have enough equity to come out ahead."
What it means for homebuyers, sellers, and the housing market
According to the report, affordability has evolved into an increasingly important factor in home purchase decisions, and a drop in home listing prices creates potential opportunities for buyers, especially with some creativity.
"If buyers see homes sitting on the market for a while that haven't received many good offers, there may be some opportunities for further negotiations. It never hurts to ask a seller if they would be willing to reduce their price a little, contribute to closing costs, or even buy down their mortgage rate," said Realtor.com Executive News Editor Clare Trapasso. "While this likely won't work for the well-located, move-in ready homes oozing curb appeal, buyers may want to take another look at homes that may need a little work. Sometimes a coat of paint and minor work can make a big difference."
Home asking prices see first annual decline as high borrowing costs create barriers
Recent near-record high mortgage rates and still-high listing prices continue to create affordability challenges for homebuyers, which is putting downward pressure on home list prices, which slipped annually in June for the first time since 2017. Despite high borrowing costs and a low inventory of homes to choose from in the market, homebuying sentiment continues to improve in recent months, and a new survey from Realtor.com [4] and Censuswide [5] found that the vast majority of respondents, nearly 9 in 10 of those shopping, still hope to make a home purchase happen this year.
- In June, the U.S. median list price grew to $445,000, up from $441,000 in May but down slightly (-0.9%) from June 2022's record high of $449,000.
- Northeastern metros had the highest growth rate in active listing prices, with an average increase of 11.7% over the past year. Prices in Cincinnati, Ohio (+20.0%), Rochester, NY (+19.6%), and Los Angeles (+17.7%) saw the biggest increases among large metros. However, in each of these metros the mix of inventory changed and larger, more expensive homes were listed for sale in June compared to the previous year.
- Among the 50 largest U.S. metros, 15 out of the largest 50 markets saw their median list price decline. The greatest price declines were seen in Texas metros: Austin (-6.8% year-over-year), Houston (-5.1%), and Raleigh, NC (-4.2%).
- Nationally, the share of homes with price reductions was mostly flat in June, decreasing slightly from 14.7% last June to 14.1% this year.
- Among the largest metros, the largest increases in the percentage of homes with price reductions compared to last year were in San Antonio, Texas (+8.3 percentage points), Memphis, TN (+6.3 pp), and Jacksonville, FL (+4.7 pp).
Home inventories tighten in many areas across the country
There continues to be an ongoing lack of homes for sale as potential sellers with near-record equity take a wait-and-see approach and buyers compete over the remaining available homes for sale.
In June, the growth in the number of active homes for sale slowed for the fourth month in a row, and growth stalled completely in the final week of June, with the number of active homes for sale slipping below (-0.3%) year ago levels for the first time in a year (59 weeks).
New listings to the market have been scarce this year too–the pace of new listings year-to-date is even lower (-16.4%) than in the first half of 2020, when the real estate market was still contending with pandemic-era closures, restrictions, and uncertainties–highlighting just how short on options homebuyers are in today's market.
- Nationally, active inventory grew 7.1% year-over-year in June, but slowed for the fourth month in a row, registering less than half of May's 21.5% rate. On average, active inventory in June was 50.6% below pre-pandemic 2017–2019 levels.
- Both pending listings (-16.7%), or homes under contract, and newly listed homes (-25.7%) declined year-over-year. The number of homes newly-listed for sale declined at a faster rate in June than May's 22.7% decrease.
- Among the 50 largest metros, inventory growth is being driven almost exclusively by the South, which saw the most growth (+24.1%) in homes for sale compared to last June, led by San Antonio (+65.7%), Nashville, TN (63.3%), and New Orleans (60.0%). All other regions saw declining annual growth in active inventory in June.
- Active inventory decreased in 28 out of 50 of the largest metros compared to last year. Western markets reported the largest yearly declines, with the top three in California metros: San Jose, (-44.1%), San Diego (-35.9%), and Sacramento (-33.4%).
- In June, none of the 50 largest metro areas saw new listings increase over last year.
Homes continue to linger longer on the market, giving homebuyers more time to search
Despite a significant slowing from the frenzied pace of the past couple years, in most areas of the country, the housing market continues to move quicker than it did in the pre-pandemic era, with homes today selling more than a week faster on average than in pre-pandemic June 2017-2019.
The typical home spent 43 days on market in June, 14 days longer than this time last year, but 10 fewer days than they typically did in the average June 2017–2019.
Across the 50 largest U.S. metros, in June the typical home spent 44 days on the market, 13 days more than the previous June. This trend was seen across all regions, with larger metros in the South seeing the greatest increase (+15 days), followed by the West (+9 days), Northeast (+7 days), and Midwest (+6 days). Homes in Western metros were also spending one more day on the market than pre-pandemic times, but in all other regions homes were still selling more quickly.
Time on market increased the most in Raleigh, N.C. (+26 days), Austin, Texas (+25 days), and Miami (+25 days). All of the 50 largest metros saw an increase in time on market compared to the previous year.
To read the full report, including more data, charts, and methodology, click here [6].