Home Price Growth Slows to Lowest Rate on Record

While national home prices saw a slight increase in May, price growth decelerated to a record low rate. Realtor.com® released its May Housing Trends Report, showing a 0.9% annual increase in home price growth along with declines in active inventory for 21 of the 50 largest metros. 

The slowing price growth suggests we may not see a new peak for home prices in 2023. 

Meanwhile, growth in housing supply continues to slow and inventory levels are declining in many metros as fewer sellers, compared to a year ago, are listing their homes, and as buyers compete for available listings—especially the more affordable ones. 

What does this mean for buyers, sellers, and the U.S. housing market?

A recent report from Realtor.com® showed the first decline in down payments (the amount paid) since the second quarter of 2020, after peaking in Q2 2022. Buyers in today’s market are finding it more difficult to keep up with housing costs. 

That said, a slowing market could mean less competition, making it easier for buyers to get an offer accepted while paying less up front. 

Either way, buyers do have options—including down payment assistance programs, which are widely available and particularly helpful for low-income buyers. 

A drop in competition could also bring about an increase in seller concessions as homeowners with a need to move will be more likely to offer these to expedite a sale. 

Home price growth for the typical home slows to the low single digits

While home listing prices for May were slightly higher compared to May of 2022, growth in the typical listing price of for-sale homes continued trending downward into the low single digits. 

Key home price metrics for May:

• The U.S. median list price rose to $441,00—up from $430,000 in April and down -1.7% from the record high of $449,000 reached in June 2022. 
• The annual home price growth rate decelerated to +0.9% in May—down from 2.5% in April and falling to the lowest price growth in Realtor.com’s records dating back to 2016.
• Nationwide, the median listing price per square foot declined (-0.3%) compared to one year ago for the first time in RDC’s data history. 
• At the current rate of slowing, asking prices are likely to fall year over year by next month. 
• The monthly cost of financing 80% of the typical home price increased year over year in May by about $296 (+15.5%) due to higher mortgage rates and home prices. 
• Fifteen of the 50 largest U.S. metros saw declines in their median list price. 
• Texas metros saw the steepest declines in home prices: Austin (-7.3% year over year), Houston (-5.9%), and San Antonio (-5.8%). 
• Home sellers still have high expectations when it comes to pricing their homes—in some cases, too high, and the number of homes with price reductions is higher compared to one year ago—though still comparable to pre-pandemic years. 
• Nationwide, 12.7% of active listings saw a price reduction in May—up from 10.2% in May 2022 but below typical 2017-2019 levels. 
• The largest increases in the share of homes with price reductions were in large southern metros, led by Austin, TX (+11.9 percentage points year over year); San Antonio, TX (+9.1 ppts), and Oklahoma City, OK (+8.7 ppts). 

Inventory growth slowed for the third month in a row

Active housing supply in the U.S. saw year over year growth but slowed for the third consecutive month as fewer potential sellers decided to list their homes, allowing the market to catch up with the period of faster inventory growth that began in May 2022. 

Home shoppers in today’s market have fewer homes to choose from, but the slowing growth in active listings suggests buyers are still searching for and finding deals. 

Sellers, for their part, despite their relative high home equity, are holding back from the market. New listings remain well below those of May 2022, and the pace of new listings was even slower than that of May 2020 when sellers were dealing with pandemic-era restrictions. 

Here’s the breakdown on inventory for May 2023:

• The number of active listings increased 21.5% in May, compared to one year ago
• The inventory growth rate, on the other hand, continued slowing for the third consecutive month. 
• Both new listings (-22.7%) and pending listings (-18.1%) declined on an annual basis. 
• In 21 of the 50 largest metros, active inventory decreased year over year. 
• Markets reporting the largest yearly declines were San Jose, CA (-35.3%); Sacramento, CA (-27.3%); and Hartford, CT (-26.0%). 
• Among the 50 largest U.S. metros, active inventory grew by 20.8% year over year, due exclusively to increase in Southern metros, including Nashville, TN (+124.7%); Austin, TX (+112.5%); and San Antonio, TX (+93.4%). 
• Despite the high growth in inventory compared to May 2022, most Southern metros still recorded lower inventory levels compared to before the pandemic. 
• On average, no region or metro area in the U.S. recorded an annual increase in new listings for May.  
• The South recorded the smallest annual declines in new listings activity (-20.4%), while the West saw the biggest declines (-32.9%). The Northeast (-22.9%) and Midwest (-22.8%) took second and third place. 

Homes spent two weeks longer on the market compared to May 2022

Compared to a year ago, homes spent, on average, two weeks longer on the market before going under contract. While that’s not great news for sellers in a hurry to move, it does give buyers more time to search for homes and negotiate deals. 

That said, days on market are shrinking compared to January’s recent high, which suggests buyers are out there shopping—and competing for available homes. 

Here’s a breakdown of inventory trends for May:

• Nationwide, the typical home spent 43 days on market—two weeks longer than the same time last year but 9 days faster than the average pre-pandemic norms for 2017-2019
• Across the 50 largest metros, the typical home spent 37 days on market—13 days more than May 2022. 
• All U.S. regions saw year-over-year increases in days on market—with larger Southern metros recording the greatest increase at 16 days, followed by the West (+12 days), Midwest (+9 days), and Northeast (+7 days).
• Every one of the 50 largest U.S. metros recorded a year-over-year increase in days on market, with the biggest increases in Raleigh (+31 days), Austin (+28 days), and Miami (+27 days). 

Read the full report for more details. 

Takeaways for real estate agents

As an agent, you need to know the ins and outs of your local market—as well as what’s happening on the macro level. Make it a priority to learn as much as you can when you’re not doing one of the top five income-producing activities for agents. 

Then prepare yourself to share all the information your clients need—using clear and concise language—so they can make decisions that will benefit them for years to come.