The typically hot summer housing market cooled off last month, likely due to persistently high mortgage rates. However, this shift could spell good news for homebuyers.

According to a new report by Realtor.com®, the number of homes actively for sale in August was 36.2% higher than the previous year, marking the 10th consecutive month of growth. This surge means the number of listings is now at its highest level since May 2020, as noted by Realtor.com senior economist Ralph McLaughlin.

More Choices and Better Deals for Buyers

Buyers now have more options and more budget-friendly homes to consider. In August, 19.3% of listings saw price reductions, the highest for an August since 2018. This trend suggests that buyers might be gaining the upper hand in the housing market.

“A growing number of homes on the market and a rising share of price cuts indicate that today’s housing market isn’t as heavily tipped toward sellers as it has been in recent years,” says Realtor.com® Chief Economist Danielle Hale. McLaughlin adds, “Sellers are increasingly showing patience and modesty—something buyers haven’t much experienced in the post-pandemic housing market.”

Mortgage Rates and Market Dynamics

High mortgage rates have significantly slowed the housing market over the summer, as both buyers and sellers waited for rates to drop. In August, mortgage rates fell to their lowest level in 18 months—6.35%—due to lower-than-expected job growth in July. However, this rate might still be too high for some budget-conscious buyers.

With expectations that the Federal Reserve will cut rates three times this year, McLaughlin suggests that some potential buyers are waiting on the sidelines until rates decrease further.

Decline in Home Prices

With an increase in price reductions, median home prices fell from $439,950 in July to $429,995 in August. “We’ve seen more sellers listing homes for sale compared with the prior year,” says Hale. This influx of sellers, combined with many buyers pressing pause, has shifted the market balance, prompting more sellers to adjust their prices.

Despite the overall decline in the national median list price, not all prices decreased. When accounting for a shift toward smaller homes, the typical home listed this year has actually increased in asking price compared to last year, according to McLaughlin.

Regional Trends and Inventory Growth

The growth in homes priced between $200,000 and $350,000 outpaced all other price categories, with the number of homes for sale in this range growing by 45.1% year over year, particularly in the South. Consequently, the median price per square foot increased by 2.3% in August compared to the same time last year and by a significant 50.9% compared to July 2019.

Homebuyers had more homes to tour last month, with all four U.S. regions seeing an increase in active home listings. The South led with a 46.0% increase, followed by the West at 35.7%, the Midwest at 23.8%, and the Northeast at 15.1%. The metros with the largest increases in homes for sale were Tampa, FL (91.1%), San Diego (80.1%), and Orlando, FL (75.7%).

Fresh Listings Decline

While overall housing stock rose, newly listed homes dropped by 0.8% from last year’s levels, breaking a nine-month streak of increasing listing activity. However, this trend could reverse soon.

Stay tuned for more updates as we continue to monitor these evolving market trends.