In most areas of the country, home prices are still rising as buyers face higher mortgage rates, which fluctuated between 6.1% and 6.7% in the first quarter of this year, according to new National Association of REALTORS® data. The average monthly mortgage payment on a typical existing single-family home jumped 33% compared to a year earlier.
But in some markets, particularly areas that saw a huge run-up in home prices in recent years, they’re starting to cool. A few markets are even posting declines in home price drops—by as much as 10% compared to a year earlier.
NAR’s latest report shows that more metros are readjusting after a pandemic-era homebuying frenzy in which home prices reached record highs. “Generally speaking, home prices are lower in expensive markets and higher in affordable markets, implying greater mortgage rate sensitivity for high-priced homes,” says NAR Chief Economist Lawrence Yun.
He added that in the first quarter, high-priced cities like San Francisco and San Jose in California and Reno, Nev., posted home price drops of at least 10% compared to a year earlier. On the other hand, prices increased by at least 10% compared to the previous year in places like Milwaukee; Dayton, Ohio; and Oklahoma City.
‘Price Declines Could Be Short-Lived’
While 70% of the metros NAR tracks are still experiencing an uptick in home prices, the national median price for a single-family existing home decreased slightly, by 0.2% to $371,200 in the first quarter. That reflects a slowdown in home prices in more places: In the previous quarter, the national median price rose 4%.
In the first quarter, about 31% of metros saw home prices decline, according to NAR’s report.
“Home prices are lower in cities that previously experienced rapid price gains,” Yun notes. He flags cities like Boise, Idaho, and Austin, Texas, where home prices surged as high as 67% through 2022 but are now coming down. In the first quarter, year-over-year prices fell 13.5% in Austin, 10.3% in Boise and 7.3% in Phoenix, NAR’s report shows.
For home buyers, this represents an opportunity. “The latest price reductions in these areas have improved housing affordability and led to some buyers returning, given the sustained, rapid job creation in their respective markets,” Yun says.
But sellers shouldn’t panic: “Due to the intense housing inventory shortage, multiple offers are returning, especially on affordable homes,” Yun says. “Price declines could be short-lived.”
Lean housing inventory is helping home prices remain strong as fewer homeowners decide to sell. In the first quarter, inventory averaged 1.63 million listings—marking a 40% decrease compared to pre-pandemic levels from the first quarter of 2019, NAR notes.