July Sees First Seasonal Drop in Home Prices: A Silver Lining for Buyers

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For the first time ever, the housing market experienced a seasonal decline in home prices during July, a month traditionally marked by peak sales activity. According to the latest report from Realtor.com®, the national median list price fell from $445,000 in June to $439,950 in July.

A Cooling Market Benefits Buyers

This price drop comes as a welcome relief for buyers, who have been grappling with high home prices amid fluctuating mortgage rates. Ralph McLaughlin, senior economist at Realtor.com®, attributes the downturn to a sluggish summer housing market, where both buyers and sellers are taking a cautious approach. “As mortgage rates fell in July to their lowest since March, expectations that the Federal Reserve might cut rates soon led some buyers to hold off on purchasing,” McLaughlin noted.

The current dip in home prices also reflects a broader trend of slowing home sales, which are moving at the slowest pace since 2020. The number of listings with price reductions surged to 18.9% in July, up from 15.5% a year ago. This trend indicates that sellers are adjusting their expectations in response to a cooling market.

Inventory Increases: A Market Shifting Towards Balance

Despite the dip in prices, the housing market is seeing a significant increase in inventory. The total number of homes for sale in July rose by 36.6% year-over-year, marking the ninth consecutive month of growth. This surge in listings is a sign that the market is moving towards normalization after a period of intense demand.

McLaughlin described this increase as a “welcome sign that the housing market is normalizing,” with inventory levels now at a post-pandemic high. All four U.S. regions experienced growth in active home listings, with the South leading the charge at 47.6%, followed by the West at 35.4%, the Midwest at 22.7%, and the Northeast at 14.7%. Notable metro areas with the largest increases in homes for sale included Tampa, FL (94.9%), Orlando, FL (78.7%), and San Diego (77.7%).

Fresh Listings and Market Dynamics

Newly listed homes saw a 3.6% increase from last year, reflecting a rise in seller activity. The West saw a 7.3% increase in new listings, while the Northeast and Midwest experienced growth of 3% and 0.9%, respectively. However, the South saw a slight decline of 0.5% in new listings.

Seattle, San Jose, CA, and Columbus, OH, saw the largest increases in new listings compared to last year, with growth rates of 37.3%, 30.8%, and 17.4%, respectively.

The Price Per Square Foot Paradox

Despite the overall decline in median list prices, the price per square foot continued to rise, increasing by 3.1% in July compared to the previous year. This rise reflects a shift towards smaller, more affordable homes in the inventory mix. Homes priced between $200,000 and $350,000 have seen the most significant growth, up 47.3% year-over-year.

Homes on the Market: A Growing Trend

The typical home spent 50 days on the market in July, a five-day increase from the same period last year. This trend of longer market times highlights the ongoing imbalance between inventory and sales. McLaughlin anticipates that as mortgage rates potentially decrease in the coming months, the market may see a resurgence in selling activity, particularly if the Federal Reserve cuts rates in September.

In summary, July’s unexpected drop in home prices coupled with a significant increase in inventory signals a shifting market that could benefit buyers. As the market continues to adjust, it remains to be seen how these trends will evolve and what impact they will have on future homebuying decisions.