U.S. home prices inched up just 0.7% year over year in May — the slowest annual growth rate since June 2023 — even as the median sale price hit a record May high of $440,997, according to Redfin’s latest housing market report. While prices are still up slightly on paper, underlying market dynamics point toward a cooling market across much of the country.
Redfin has already forecast year-over-year price declines by the end of 2025. In some metros, that future is already here. Eleven of the 50 largest U.S. metros saw price drops last month, led by Oakland (-6.7%), Jacksonville (-5.2%), and Dallas (-4.6%).
More Sellers Than Buyers: A New Phase For Housing
The main culprit for slowing price growth? An oversupply of homes relative to buyer demand, as affordability challenges and economic uncertainty continue to weigh heavily.
Mortgage rates remained elevated near 7%, keeping existing-home sales sluggish. May’s seasonally adjusted annualized sales rate of 4.21 million was essentially flat from April and down 0.3% from a year ago. Meanwhile, total active listings rose 16.2% year over year, reaching their highest level since March 2020.
That growing inventory is not just a result of more homeowners listing; it’s also a function of homes sitting longer. The typical property went under contract in 38 days, nearly a week longer than last year and the slowest May pace since 2020.
“The market has been shifting in buyers’ favor, but it doesn’t feel that way to many Americans because homebuying costs remain near record highs,” said Asad Khan, Redfin Senior Economist. “Buyers may gain more negotiating power in the coming months as more sellers face a tough reality: Sellers no longer hold all the cards.”
Indeed, just 31.2% of homes sold above asking price in May — the lowest share for the month in five years.
Sellers Lose Steam As New Listings Taper
Even though overall inventory climbed, fresh supply is beginning to wane. New listings dropped 2.9% month over month on a seasonally adjusted basis, and their year-over-year growth of 2.9% was the slowest since November.
“We’ve hit a plateau with home prices. A lot of homeowners are considering renting their homes out instead of selling,” said Rob Wittman, a Redfin Premier agent in the Washington, D.C. area.
“The buyers who come through on tour these days have little urgency. They’re often browsing instead of buying because they're hoping mortgage rates will come down, even though that's unlikely to happen soon.”
Redfin anticipates mortgage rates will hover around 7% through year-end.
Cancellations Reach Record High For May
Market hesitancy is translating into cold feet: about 59,000 home-purchase contracts were canceled in May, representing 14.6% of homes that went under contract. That’s the highest cancellation rate ever recorded for May and up from 14% a year earlier.
Florida and Texas were ground zero for deal failures. San Antonio (21.3%), Orlando (20%), and Jacksonville (19.7%) topped the list of metros with the highest cancellation rates.
Regional Roundup: Midwest Strength, Sunbelt Softness
Pending sales data highlighted stark regional contrasts. The Midwest led in buyer activity, with Cincinnati (+8.2%), Indianapolis (+6.7%), and Milwaukee (+6.6%) posting the biggest gains. In contrast, Florida metros saw steep drops, including Miami (-19.6%) and Fort Lauderdale (-16.9%).
Prices fared best in the Northeast, driven by tighter inventory. Philadelphia (+10.9%), New Brunswick, N.J. (+8.4%), and Providence (+7.7%) saw the sharpest increases.
Meanwhile, price declines in California, Florida, and Texas reflect localized headwinds like overbuilding, insurance cost spikes, and climate-related risk.
