Map shows cities suffering sharpest home prices drops
After years of relentless price growth, U.S. home asking prices are now falling at their fastest pace in nearly a decadeaccording to new data from a real estate listings website.
High mortgage rates, stretched affordability, and geopolitical uncertainty tied to the Iran war continue to weigh on demand.
The sustained cooling marks a clear shift in the U.S. housing market: after the pandemic-era boom pushed prices to record highs, buyers are stepping back, forcing sellers to cut expectations.
Realtor.com said the national median listing price has been falling for seven consecutive months now, as mortgage rates remain high and rising inflation fuels Americans’ fear over what could come next.
In May, the median listing price fell 2.4 percent year-over-year to $429,500—the steepest annual decline in data going back to 2017.
Price weakness is broad-based. The median price per square foot dropped 2.5 percent year-over-year and declined in 35 of the 50 largest U.S. metro areas, signaling that the slowdown is not confined to isolated markets.
Markets That Reported the Steepest Price Drops
Some of the sharpest corrections are concentrated in former pandemic boom and affordability-stressed markets. Memphis, Tennessee, saw the steepest drop, with prices down 13 percent year-over-year.
It was followed by:
- Buffalo, New York (-11.6 percent)
- Austin, Texas (-9.5 percent)
- Los Angeles (-7.9 percent)
The top markets that faced the steepest year-over-year median asking price drops in May include:
- Memphis (-13.0 percent)
- Buffalo, New York (-11.6 percent)
- Austin, Texas (-9.5 percent)
- Los Angeles, California (-7.9 percent)
- San Diego, California (-5.6 percent)
- Phoenix, Arizona (-5.1 percent)
- San Antonio, Texas (-4.4 percent)
- Indianapolis, Indiana (-3.5 percent)
- Houston, Texas (-3.4 percent)
- Boston, Massachusetts (-3.4 percent)
Something different is going on in all these different markets.
The former pandemic boomtown of Austin has been experiencing a stark price correction since the end of the health emergency. This is mainly due to inventory levels spiking at the same time as demand started dwindling due to eroding affordability and return-to-office orders across the country.
Memphis, on the other hand, “looks like a slowing and stagnating market where prices are dropping, as opposed to one where lower prices are causing volumes to pick up or drawing more buyers into the market,” Realtor.com senior economist Jake Krimmel said in a statement.
When it comes to Los Angeles, one of the most-expensive markets in the nation, Victor Currie, a real estate agent at Douglas Elliman Real Estate in Los Angeles, believes other factors are at play.
“Between the Iran war, tariff issues, inflation, and higher interest rates, a lot of potential buyers are feeling uncertain and pulling back, or at least being more cautious,” he told Realtor.com. In the city, the typical spring home-buying bump failed to materialize this year, Currie said.
Despite the rapid fall in asking prices reported last month, the housing market is unlikely to crash this year, experts told Newsweek.
“The risks most worth watching aren’t signs of an imminent crash; they’re slower-moving,” Hannah Jones, senior economist at Realtor.com, said.
“Persistent affordability constraints, the lock-in effect keeping existing homeowners from listing, and the pace of new construction relative to long-term demand are all concerns that will continue to weigh down the housing market,” she added.
If anything, the U.S. housing market risks remaining sluggish, unless mortgage rates come down significantly in the coming months, improving affordability for buyers.
Buyers Are Taking Advantage of Price Drops
Experts believe that buyers and sellers have reached a compromise they are both happy with, and which has the potential of shaking up the sluggish U.S. housing market.
Unlike last year’s pattern of overpricing followed by cuts, sellers are now more often pricing realistically from the start.
The share of listings with price reductions fell to 17.5 percent, down 1.6 percentage points year-over-year.
That is because sellers are now pricing their homes correctly from the get-go, instead of testing the market to see what they can get out of it.
As Currie told Realtor.com, the stellar pricing of the pandemic is now solidly “in the rearview mirror now” for sellers, who have adjusted their expectations.
“Sellers are pricing to sell rather than pricing to test the market” Krimmel said.
“Buyers, despite rates remaining higher than expected, are still showing up when prices are within budget.
“Many markets and most regions have been moving in a buyer-friendly direction for some time now, and that is certainly reflected in sellers’ asking prices right now,” he added.
Buyers are taking notice of the shift in sellers’ mindset and pricing, and are positively reacting, data shows.
The number of homes going under contract in May, which indicates that a buyer’s offer has been accepted but the deal is not yet finalized, rose for a sixth straight month, jumping 4.3 percent from a year earlier.
