Home prices rose slightly in May, but price growth slowed to the lowest rate on record since 2016, Realtor.com said Thursday.
The online real estate marketplace released its Monthly Housing Trends Report for May, which states that the slowing growth suggests home prices may not see a new peak in 2023,
Home inventory growth also continued to slow in May, and is declining in many metro areas across the country, as fewer sellers list their homes and buyers compete over the remaining affordable homes for sale.
"April and May are historically popular months to buy, and typically by this time in the year we've exceeded the prior year's peak home price," said Danielle Hale, Realtor.com’s chief economist. “Weakening home-price growth for the past 12 months is increasing the odds that we may not see a new home price peak this year, for the first time in the history of our listing data, which dates back to mid-2016, and this is likely welcome news to homeshoppers."
Hale continued, “Despite stalling price growth, home listing prices are up slightly compared to last May, and with rates more than a percentage point higher than a year ago, buyers continue to face affordability headwinds. The good news for sellers is that buyers are still out there, and this month's slower growth in the active inventory of homes for sale indicates that shoppers are in the market and actively searching for homes that fit their needs and budget."
What It Means
A slower housing market means buyers in certain areas may find they can once again have an offer accepted when putting less down. A recent report from Realtor.com found down payments declined for the first time since the second quarter of 2020, suggesting it's getting harder for buyers to keep up with costs and that a less competitive housing market may be opening up opportunities for buyers making somewhat smaller down payments.
"As buyers' budgets are being stretched to the max, there are opportunities for negotiation, especially on homes that have been sitting on the market for a while," said Realtor.com Executive News Editor Clare Trapasso. "They can ask sellers to come down on the price, make costly repairs, as well as contribute to their closing costs or buy down their mortgage rates. If they're purchasing new construction, they can also request upgrades. This can add up to substantial savings."
Home listing prices were slightly higher in May compared to a year ago, but growth in the typical asking price of for-sale homes continued to decline to the low single digits, the report states. In addition, the median listing price on a square-foot basis declined compared to last year for the first time in Realtor.com data history.
At this rate of slowing, Realtor.com said, asking prices are likely to decline relative to the previous year by next month.
Despite this trend, home sellers continue to have high expectations of the housing market and buyers, in some cases, too high. The number of homes with price reductions — a sign that a seller needed to adjust pricing to attract a buyer — was higher than year ago levels but in line with pre-pandemic years.
- The U.S. median list price grew to $441,000 in May, up from $430,000 in April, but down 1.7% from June 2022's record high of $449,000. The annual growth rate slowed to 0.9% in May, down from April's 2.5% growth rate, to the lowest price growth in Realtor.com's records since 2016.
- Nationally, the median listing price per square foot declined 0.3% compared to the previous year for the first time since 2016.
- Higher mortgage rates and home prices compared to May of last year increased the monthly cost of financing 80% of the typical home by roughly $296 (15.5%) compared to a year ago.
- Among the 50 largest U.S. metros, 15 of the largest 50 markets saw their median list price decline. The greatest price declines were seen in Texas metros: Austin (7.3% year over year), Houston (5.9%), and San Antonio (5.8%).
- Nationally, 12.7% of active listings had their price reduced in May, up from 10.2% in May of last year. While higher than last year, the rate is below typical 2017-19 levels. Large southern metros saw the largest increase in the percentage of homes with price reductions, led by Austin, Texas (11.9 percentage points year over year), San Antonio, Texas (9.1 percentage points) and Oklahoma City (8.7 percentage points).
Inventory tightens
The U.S. supply of active homes for sales continued to grow in May relative to this time last year, but slowed for the third month in a row.
Today's buyers are grappling with low inventory, but the slowing growth in active inventory in May indicates that buyers continue to search for and find deals. Despite sitting on relatively high home equity, sellers are staying on the sidelines, and the number of newly listed homes remains well below last year's level.
In fact, the pace of new home listings in May was even lower than in May 2020, when the real estate market was still contending with pandemic-era closures and restrictions.
- Nationally, the number of active listings grew 21.5% year over year in May; however, the inventory growth rate continued to slow for the third month in a row. Both newly listed homes (-22.7%) and homes under contract (-18.1%), or pending listings, declined year over year.
- Compared to last year, active inventory decreased in 21 of the 50 of the largest metros. Markets that reported large yearly declines included San Jose, Calif. (35.3%), Sacramento (27.3%), and Hartford, Conn. (26%).
- Among the 50 largest metros, active inventory increased 20.8% over last year, driven exclusively by Southern metros, such as Nashville, Tenn. (124.7%); Austin (112.5%), and San Antonio (93.4%). Despite high inventory growth compared to last year, most Southern metros still had lower inventory levels compared to pre-pandemic years.
- On average across the 50 largest metros, no region or metro area saw year-over-year increases in new listings in May. The South saw new listing activity decline the least (20.4%) compared to the previous year, while they fell 32.9% in the West, 22.9% in the Northeast, and 22.8% in the Midwest.
More Days On Market
In May, the typical home spent two weeks longer on the market than the same time last year, but a shrinking difference since January's recent high suggests buyers are out shopping for homes and competition still exists. That's keeping sellers in a very good position, with well-priced, updated homes still attracting buyers and selling more than a week faster than was common before the pandemic, Realtor.com said.
- In May, the typical home spent 43 days on market, 14 days longer than this time last year, but nine days faster than the pre-pandemic May 2017-19 average.
- Across the 50 largest U.S. metros, the typical home spent 37 days on the market, 13 days more than the previous May. This trend was seen across all regions, with larger metros in the South seeing the greatest increase (+16 days), followed by the West (+12 days), Midwest (+9 days) and Northeast (+7 days).
- All of the 50 largest metros saw an increase in time on market compared to the previous year. Time on market increased the most in Raleigh, N.C., (+31 days), Austin (+28 days), and Miami (+27 days).
