Home Price Cuts Reach Highest Level in 5 Years as Sellers Show ‘Patience and Modesty’

The usually hot summer housing market wilted last month, likely due to the continued heat of stubbornly high mortgage rates.

And that could be great news for homebuyers.

A new report by Realtor.com® found that the number of homes actively for sale in August was 36.2% higher than the year prior, marking the 10th consecutive month of growth.

That means the number of listings is “now at its highest level since May 2020,” says Realtor.com senior economist Ralph McLaughlin in his recent analysis.

Buyers have not only more choices in general but also more bargain-friendly homes to consider. In August, 19.3% of listings saw price reductions. That’s the highest amount for an August since 2018, which is welcome news for buyers weary of sticker shock.

What does this all reveal about the state of the housing market? Buyers might be gaining the upper hand.

“A growing number of homes on the market and rising share of price cuts indicate that today’s housing market isn’t as heavily tipped toward sellers as it has been in recent years,” says Realtor.com® Chief Economist Danielle Hale.

“Sellers are increasingly showing patience and modesty—something buyers haven’t much experienced in the post-pandemic housing market,” McLaughlin adds.

Mortgage rates are expected to fall

High mortgage rates have slowed the housing market considerably over the summer months, as buyers and sellers alike pumped the brakes and bided their time in hopes that rates will fall—and they have.

Mortgage rates fell in August to their lowest level—6.35%—in 18 months on lower-than-expected job growth in July. Yet that number might not be low enough to tempt some buget-minded buyers just yet.

With “expectations that the Federal Reserve will cut rates three times this year, it’s likely that some potential buyers are sidelining themselves until rates come down further,” says McLaughlin.

Home prices declined

With price reductions up in August, median home prices fell, dropping from $439,950 in July to $429,995.

“We’ve seen more sellers listing homes for sale compared with the prior year,” says Hale. “The buildup of sellers at the same time that many buyers are pressing pause has led to a shift in market balance, and more sellers are calibrating their price to reflect this.”

But despite the overall decline in the national median list price, all prices didn’t decrease—technically.

“When a change in the mix of inventory toward smaller homes is accounted for, the typical home listed this year has increased in asking price compared with last year,” says McLaughlin.

Last month, as in the previous six months, the growth in homes priced in the $200,000 to $350,000 range outpaced all other price categories, as the number of homes for sale in this range grew by 45.1% year over year, particularly in the South.

As a result, the median price per square foot increased 2.3% in August compared with the same time last year and a whopping 50.9% compared with July 2019.

Homes for sale are on the rise

Homebuyers who did dip a toe in the tepid market last month had many more homes to tour.

All four regions of the U.S. saw an increase in active home listings. Buyers looking for sunny climes were particularly in luck, with the South leading the pack at 46.0%. The West followed at 35.7%, the Midwest at 23.8%, and the Northeast at 15.1%.

 The metros with the largest increases in the number of homes for sale were Tampa, FL, at 91.1%, San Diego, at 80.1%, and Orlando, FL, at 75.7%.

Fresh listings took a dive

While overall housing stock rose, newly listed homes dropped 0.8% from last year’s levels, breaking a nine-month streak of increasing listing activity.

“There are a couple of factors driving this August slowdown in new listings activity,” says Hale.

Hale points to the volatile mortgage rates over the past few months for creating “uncertainty among potential sellers. With mortgage rates climbing from February through May, it’s likely that many homeowners who might have listed in August chose to put off preparations.”

The freshest housing choices were in the South and the West, with 4.1% and 1.7% more newly listed homes than in August 2023, respectively. Meanwhile, new listings dropped by 5.4% in the Midwest and 1.0% in the Northeast.

The metros with the largest increase in fresh listings compared with last year were Cincinnati, at 31.1%, Seattle, at 29.2%, and San Diego, at 22.5%.

However, this could all turn around soon.

“We think the sharp decrease in mortgage rates seen in mid-August could lead to an increase in listings in the coming months as lower rates begin to entice the marginal homeowner to sell,” McLaughlin explains.

Homes are still lingering on the market

Home sales were positively languid in August, with the typical home spending 53 days on the market, seven more days than the same time last year.

That’s “the slowest August in five years,” says McLaughlin. “August marks the fifth in a row where homes spent more time on the market compared with the previous year as inventory continues to grow and home sales remain sluggish.”

All this means buyers have some more breathing room when making an offer.

“The 2024 housing market has clearly been less frenzied than in prior years,” says Hale.