Home prices soared across the U.S. during the pandemic buying frenzy. And that doesn’t even count the bidding wars and resulting five- and six-figure offers over the asking price. Sellers were making bank—which they needed if they switched hats to “buyer.”
Fast forward through the past several months of rising interest rates, though, and prices nationwide have taken a step back.
Median home prices are still higher than they were a year ago, but the rising cost of homeownership has taken an obvious toll on the price increases we saw earlier this year.
Some cities took a bigger hit than others.
10 metros with the biggest three-month price drops
Realtor.com shared their latest data on the ten metros with the biggest price drops from June to September. For most of them, the net year-over-year increase is smaller than the drop in price over just three months.
Charleston, SC, is the odd one out, with a total price increase of 18.6% from September 2021 to June 2022 before its 8.6% drop.
Reasons behind the price drops
The reasons for these drops in median home prices should be obvious by now:
- Decline in housing affordability from higher mortgage rates and resulting spike in monthly mortgage payments.
- Decline in purchasing power from high inflation, raising the general cost of living (gas, groceries, utilities, etc.).
- Resulting decline in buyer demand, with buyers backing out or priced out of the market.
With the Fed raising the interest rate for the third consecutive time—aiming to slow the rate of inflation and growth of housing prices—buyers and sellers alike are feeling the impact. This is especially true in metros that saw explosive growth with the pandemic migration.
Sun Belt metros, in particular, are seeing declines in median home prices as buyer demand cools. But there are advantages to the slowing of unsustainable price growth.
It’s less of a seller’s market than we saw in the first half of this year, and it’s moving toward a more balanced market with advantages for both sides.
Top takeaways for real estate agents
Three things agents can keep in mind when presenting this data to their clients:
- Home prices are still higher than they were last year
- Homes continue to sell and offers over asking still happen
- Housing inventory is up, offering buyers more options
- October and the winter months offer cost savings for buyers
Buyers typically don’t mind the price drops, but sellers (especially those living in the above metros) may feel discouraged. Show them property values are still increasing from last year.
Even when you’re not actively cultivating leads, make it a priority to build trust with your community. Be someone they can count on to keep them informed and educate them on this market’s advantages.