Homebuyers Have Been Waiting 6 Long Years for This Moment—but There’s a Huge Catch

The moment homebuyers have been waiting for has finally arrived.

For six long years, home prices have been climbing higher, topping the previous year’s number month after month. In June 2022, Americans suffered serious sticker shock when median listing prices hit an all-time record high of $449,000.

This June, however, prices did not edge higher still. Instead, they slid to $441,000, according to the Realtor.com® Monthly Housing Trends Report.

This $8,000 drop from the previous year’s price might not seem like much, but as the first annual decline seen in Realtor.com data history since 2017, it’s a pivotal moment, people! Let us pause for a moment and appreciate this.

Plus, home prices tend to peak seasonally in June, then descend toward the holidays. This means homebuyers should look forward to even lower prices for the rest of 2023.

“Home price growth is expected to decline at a modest rate of 0.6% for the year,” Realtor.com Chief Economist Danielle Hale predicts in her analysis

Why lower home prices may not mean lower housing costs

The downside, however, is that homebuyers might not feel these savings in the face of today’s mortgage rates, which are still significantly higher than last year. Rates for a 30-year fixed-rate mortgage averaged 6.67% for the week ending June 22, according to Freddie Mac.

“The issue of affordability persists,” Hale continues. “It will continue to create barriers to homeownership, leading to weakened demand in the housing market and dampened competition.”

How home sellers are reacting to lower prices

Across the country, homeowners have heard the news: The red-hot seller’s market that had driven prices into the stratosphere is over. Many are reacting to these new market conditions by simply staying put.

In June, the number of homes newly listed for sale declined by 24.1% compared with the same time last year.

Some who hoped to sell could be disappointed that they can’t fetch the same nosebleed prices their neighbors did a year earlier. Others might be willing to accept a lower price but feel “locked in” by the much lower mortgage rate they already have on their current home.

Nonetheless, the total number of homes for sale (both new listings and old that have been on the market for a while) is up by 9.5% compared with last year. So although fresh listings are down, there’s still plenty of selection, and many might be long in the tooth and ripe for price cuts. A full 14% of homes had price reductions, although this is lower than the levels seen between 2017 and 2019.

Hale also predicts that this inventory will start shrinking in the second half of he year.

“We project that housing inventory will experience a modest slip of 5% for 2023 as a whole as early-year gains become declines in the second half of the year,” she says.

Selling a home: A marathon, not a sprint

This June, the typical home spent 43 days on the market, which is two weeks longer than the same time last year. But even though the pace of sales is slowing, homes still sell around 10 days faster than they did in the average June from 2017 to 2019.

“In most areas, the housing market continues to move much faster than it did in the pre-pandemic era, despite significant slowing from the frenzied pace of the past couple years,” Hale says.

Homes in the South and the West, both of which saw the greatest influx of new residents and biggest price gains of the past few years, had the biggest increases in time on the market. In the South, homes took 15 days longer to sell than last June, and in the West, it was 10 days. In the Midwest and the Northeast, both of which are still relatively more affordable, the number of days on the market was only seven days greater.

All in all, this month’s pivotal price drop is not quite enough to revive buyers or the housing market to its previous levels.

“Despite the decline in prices,” Hale says, “the ongoing challenges in housing markets and stagnant buying power are anticipated to result in a 15.8% decrease in home sales for 2023.”

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