For six long years, home prices have been climbing, surpassing the previous year's numbers month by month. in June 2022, Americans suffered a severe price shock when the median listing price reached a record high of $449,000.
However, this June, prices did not continue to move higher. Instead, they slipped to $441,000, according to the Realtor.com® Monthly Housing Trends Report.
That $8,000 drop may not seem like much compared to the previous year's prices, but as the first annual drop in Realtor.com data history since 2017, this is a pivotal moment, people! Let's pause for a moment and appreciate this.
In addition, home prices tend to reach a seasonal peak in June and then fall just before the holidays. This means homebuyers should expect lower prices for the rest of 2023.
"Home price growth is expected to decline at a modest 0.6 percent this year," predicts Danielle Hale, chief economist at Realtor.com, in her analysis.
The downside, however, is that homebuyers may not feel these savings in the face of today's mortgage rates, which remain much higher than last year. For the week ending June 22, rates on 30-year fixed-rate mortgages averaged 6.67 percent, according to Freddie Mac.
"The affordability issue remains," Hale continued." It will continue to create barriers to homeownership, leading to weaker demand in the housing market and dampening competition."
Across the country, homeowners have heard the news: The red-hot seller's market that pushed home prices into the stratosphere is over. Many are reacting to these new market conditions by simply staying put.
In June, the number of new homes listed for sale fell by 24.1% compared to the same month last year.
Some people hoping to sell may be disappointed that they can't sell for sky-high prices like their neighbors did a year ago. Others may be willing to accept a lower price, but feel they are "locked in" by the much lower mortgage rates on their current home.
That said, the total number of homes for sale (including new listings and older homes that have been on the market for some time) is up 9.5% compared to last year. So while there are fewer new homes on the market, there are still plenty of options and many of them may be long enough to be ripe for a price reduction. A full 14 percent of homes have had price reductions, although this is lower than the level seen between 2017 and 2019.
Hale also predicts that this inventory will begin to shrink later this year.
"We project that housing inventory as a whole will experience a modest 5 percent decline in 2023 as gains made earlier in the year turn into declines in the second half of the year," she said.
The typical home spent 43 days on the market this June, which is two weeks longer than a year ago. But even though the pace of sales is slowing, homes are still selling about 10 days faster than the average June from 2017 to 2019.
"In most areas, the housing market is still moving much faster than in the pre-pandemic era, despite a significant slowdown from the frenetic pace of the past few years," Hale said.
Homes in both the South and West, which have seen the largest influx of new residents and the largest price increases over the past few years, have also seen the greatest increase in time on the market. In the South, homes are taking 15 days longer to sell than they did last June, while in the West, it's 10 days. In the Midwest and Northeast, both of which remain relatively high, there were only seven more days on the market.
All in all, this month's key price declines were not enough to bring buyers or the housing market back to previous levels.
"Despite the price declines," Hale said, "continued challenges in the housing market and stagnant purchasing power are expected to result in a 15.8 percent decline in home sales in 2023."
