Home sellers in many parts of the country are lowering asking prices as the housing market continues to cool heading into the fall.
A new Realtor.com analysis found prices declined most sharply in several metro areas that saw rapid growth during the COVID-19 pandemic. As more homes come onto the market and mortgage rates remain elevated, sellers are increasingly adjusting prices to attract buyers who have been squeezed by affordability challenges.
The report found the median listing price per square foot, which adjusts for differences in home size, fell 1.8% nationwide in August from a year earlier. It marked the 10th consecutive month of annual declines and suggests the market is continuing to normalize after years of unusually strong price growth.
Median list prices also declined across three of the nation's four regions, falling 3.6% in the Northeast, 2.6% in the South and 2.1% in the West. Prices were unchanged in the Midwest.
Why are prices falling?
Realtor.com said higher mortgage rates and changing market conditions are prompting sellers to become more realistic about pricing.
The median listing price per square foot fell in 36 of the nation's 50 largest metro areas in August, with many of the biggest declines occurring in cities that experienced housing booms during the pandemic.
"One common thread for most markets, including Austin, Tampa, San Antonio, Denver, is 2020-22 boomtowns continuing to give back some of their pandemic-era gains," Realtor.com senior economist Jake Krimmel said in a statement. "These are also, by and large, places with much more inventory now than pre-pandemic norms."
As buyers have become more selective, sellers are increasingly meeting them in the middle by lowering asking prices.
These metro areas saw the biggest declines
The Austin area of Central Texas topped the list of metro areas with the biggest price declines. Here's a look at the top 10, ranked by year-over-year decline in median price per square foot.
- Austin-Round Rock-San Marcos, Texas -8.1%
- Tampa-St. Petersburg-Clearwater, Florida: -5.6%
- Memphis, Tennessee-Mississippi-Arkansas: -4.1%
- San Francisco-Oakland-Fremont, California: -3.9%
- San Antonio-New Braunfels, Texas: -3.6%
- Denver-Aurora-Centennial, Colorado: -3.4%
- Baltimore-Columbia-Towson, Maryland: -3.2%
- San Diego-Chula Vista-Carlsbad, California: -2.7%
- Orlando-Kissimmee-Sanford, Florida: -2.6%
- Portland-Vancouver-Hillsboro, Oregon-Washington: -2.4%
The report also found prices continued to rise in some markets. Providence, Rhode Island, posted the largest increase at 9.3%, followed by Indianapolis at 4.4% and Chicago at 3.6%.
Why San Francisco is different
Unlike most of the metros on the list, San Francisco's price decline does not necessarily signal weaker demand.
The metro ranked fourth nationally after its median listing price per square foot fell 3.9% year over year. At the same time, active listings dropped 16.3% in July, and the median listing price remained high at $908,700 despite a 5.2% annual decline.
Krimmel said the shift reflects the types of homes on the market rather than falling home values.
"It's not about San Francisco homes losing value, but rather how expensive the available inventory is this year relative to last," he said in the report, explaining that smaller, higher-priced homes in the city continue to sell quickly while more larger suburban homes have entered the market.
What it means for home buyers
Compass real estate agent Veronica Peter told Realtor.com that uncertainty in the technology sector, along with high mortgage rates and weaker tech stocks, has made some buyers more cautious.
Realtor.com said the recent price adjustments could offer some relief to buyers who have struggled with affordability in recent years. As more homes become available in many markets, sellers are increasingly adjusting prices to attract qualified buyers heading into the fall homebuying season.
Reporter Anthony Thompson can be reached at ajthompson@usatodayco.com, or on X @athompsonUSAT
This article originally appeared on USA TODAY: Home prices are falling fastest in these cities. See the list
