BAM Key Details:

  • A new Redfin report shows that home prices fell 3.3% in March, marking the biggest annual drop in over a decade. 
  • While some areas, like pandemic boomtowns and coastal markets, saw home price declines, more affordable areas continue to see prices rise. 
  • Pending sales and new listings also dropped nationwide. 

The question on everyone’s mind: does this Redfin report mean that home prices are falling or are they finally easing? 

The answer depends heavily on your local market.

March Brought the Biggest Home Price Drop in Over a Decade for the U.S.

Overall, the U.S. housing market experienced a significant decline in March, with home prices falling 3.3% to $400,528, marking the largest year-over-year drop since 2012, according to a recent report by Redfin. This followed February’s 1.2% decrease, which was the first annual decrease since 2012. 

biggest home price drop in a decade—Redfin analysis

Source: Redfin

The decline in home prices was most pronounced in pandemic boomtowns and expensive coastal markets. In contrast, more affordable areas continued to see price increases.

The five markets with the biggest annual home price declines in March are the following:

  • Boise, ID: -15.4% annual decline in March
  • Austin, TX: -13.7% decline
  • Sacramento, CA: -11.9% decline
  • San Jose, CA: -10.5% decline
  • Oakland, CA: -9.7% decline

The markets with the biggest annual increases in home prices include:

  • Milwaukee, WI: 11.7% annual increase in March 
  • El Paso, TX: 11.1% increase
  • Omaha, NE: 10.7% increase
  • Camden, NJ: 10.2% increase
  • Knoxville, TN: 10.2% increase

In March, 28.5% of homes in the United States were sold at prices exceeding their original listing price, marking a significant decrease from 54.1% from the previous year.

Pending Home Sales and New Listings Also Dropped in March Nationwide

The Redfin report also shows data for pending home sales and new listings, which were both down across the U.S.

Elevated mortgage rates and a lack of homes for sale limited purchases in March. This caused pending home sales to dip 26.6% on a seasonally-adjusted basis nationwide, the lowest level since the start of the pandemic. Along with the largest decrease in home prices, Boise also had the biggest drop in pending home sales, with a 78.8% year-over-year decline. 

pending home sales

Source: Redfin

The markets with the largest drop in pending sales year-over-year include:

  • Boise, ID: -78.8% annual decline in March
  • Baton Rouge, LA: -66.3% decline
  • Allentown, PA: -60.8% decline 
  • Honolulu, HI: -56.6% decline
  • Greensboro, NC: -53.4% decline

The markets with the smallest declines in pending sales were:

  • Fort Worth, TX: -2.6% decline
  • Dallas, TX: -4.3% decline
  • Indianapolis, IN: -5.3% decline
  • Cincinnati, OH: -8.7% decline
  • Buffalo, NY: -12.2% decline

New listings also fell to the lowest level since the pandemic onset (-23.3% nationwide), as homeowners stayed put to hold onto their low mortgage rates. This shortage of supply has led to bidding wars reemerging in some markets.

According to Redfin’s analysis, new listings fell the most year-over-year in the following markets:

  • Allentown, PA: -57.1% annual decline in new listings 
  • Boise, ID: -55.2% decline 
  • Stockton, CA: -46.8% decline 
  • Greensboro, NC: -46.5% decline
  • Sacramento, CA: -44.8% decline

New listings rose in just one metro—Charlotte, NC—with a 4.3% increase in listings annually. New listings fell the least in North Port, FL (-0.2%), McAllen, TX (-2.3%) Austin (-3%) and Fort Worth (-4.1%).

This year’s spring homebuying season is lackluster. There are some signs of the typical seasonal uptick—homes are selling faster than they were in the winter—but that’s partly because there are so few new listings. Normally we see homebuyers come out in throngs at this time of year, which isn’t happening.

Daryl Fairweather

Chief Economist, Redfin

Affordability and Inventory Remain an Issue for Home Buyers

The decline in home prices may indicate a cooling market, especially in pandemic boomtowns and pricey coastal markets. 

However, as prices continue to rise around the country in more affordable areas, affordability itself is an issue for home buyers. The typical U.S. monthly housing payment just hit an all-time high, according to another Redfin report. In spite of declining home prices nationwide, the typical monthly payment is now $2,538, due to mortgage rates back on the upswing after five weeks of declines. 

A lack of inventory also remains an issue for buyers, contributing to bidding wars in some markets and preventing a further decline in prices in others. The low inventory of homes on the market may also be an issue for home sellers who are hesitant to list their properties due to concerns about finding a new home, as well as uncertainty or volatility in the broader economy. This could further exacerbate the affordability issues many homebuyers face, particularly in more expensive markets.

While the current landscape presents challenges for both parties, opportunities can still be found in certain areas and market conditions. For instance, buyers in pandemic boomtowns may benefit from lower prices and concessions offered by sellers, while sellers in markets that have not experienced dramatic price increases may find that their homes are still in demand. And opportunities with homes that are lingering on the market because they were “aspirationally” priced and may be willing to sell quickly below market without a bidding war.

The U.S. housing market experienced a significant decline in March, with home prices seeing the largest year-over-year drop since 2012. While some areas are seeing declines in prices and demand, other markets remain steady or continue to see price increases. It is crucial for agents and consumers to keep an eye on local market trends in order to make the best decisions with their properties.

Will this home price decrease continue or reverse for 2023?