For more than four years, home sellers have had an advantage in the housing market. Now shoppers may finally be able to catch a break.
A new report from Realtor.com shows that the average list price fell in September in more than half of the 50 largest metropolitan areas, with some markets seeing declines of up to 12% year over year. This is in stark contrast to just a few months ago, when sales prices hit record highs. As home prices slow, along with lower mortgage rates and higher inventories, the market could turn in favor of buyers.
Moreover, many housing markets experiencing lower prices also happened to be cities that were considered desirable during the pandemic, either because they had more affordable housing, more favorable tax policies, or a better climate. Florida, for example, has four cities that are falling in price, including Miami and Tampa, although the impact of Hurricanes Helen and Milton on home prices in the latter city remains to be seen. Other pandemic boom cities on the list include Austin, Texas, and Nashville, Tennessee.
Housing affordability may improve
Homebuyers have been navigating a challenging housing market since 2020, albeit for different reasons. The first two years of the pandemic brought mortgage rates to record lows, allowing buyers to buy larger, more expensive homes as borrowing costs fell. But the ensuing buying boom sent home prices soaring as potential buyers competed with each other and engaged in bidding wars.
However, starting in 2022, the market began to change. Mortgage rates began to rise rapidly, approaching 8% last October. With prices and financing rising, the shortage of affordable housing has reached an all-time low, driving out many buyers and leading to a sluggish market. The number of home sales last year was 4.09 million, the lowest level in nearly 30 years, according to the National Association of Realtors.
Now the market appears to be going through another shift. Mortgage rates, which hovered above 7% for most of the year, are now in the low 6% range. These lower borrowing costs have increased affordability for many buyers with limited monthly budgets.
Home sellers are also being more flexible when negotiating a sale. Realizing that homes stay on the market longer and that they can no longer expect multiple offers to push prices significantly higher, homeowners are putting more reasonable starting prices on the market and are more willing to compromise. In April, prices were reduced on 22.4% of homes for sale, according to listing site Zillow, the highest percentage in six years.
As a result of all these changes, the purchasing experience has improved, although it is far from the level of affordability that existed in the pre-pandemic years. However, falling home prices and mortgage rates are good news for home buyers waiting for their dream home.
10 Markets with the Biggest Drops in Home Prices
Some of the most popular cities for homebuyers looking to move are seeing the biggest changes in home prices. Here are the metros with the biggest year-over-year price declines:
- Miami, Florida – 12.4%
- Cincinnati, Ohio – 9.5%
- San Francisco, California – 8.9%
- Kansas City, Missouri – 8.4%
- Austin, Texas – 6.6%
- Jacksonville, Florida – 6.1%
- Denver, Colorado – 6%
- Orlando, Florida – 5.6%
- Tampa, Florida – 5.5%
- Nashville, Tennessee – 5.4%
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