Based on Realtor.com's latest Monthly Housing Trends Report released today, U.S. home prices rose slightly in May 2023, but price growth slowed to the lowest rate on record since 2016, suggesting home prices may not see a new peak in 2023.
Additionally, home inventory growth continues to slow and is declining in many metro areas across the country as fewer sellers list their homes than last year and buyers compete over the remaining affordable homes for sale.
"April and May are historically popular months to buy, and typically by this time in the year we've exceeded the prior year's peak home price. Weakening home price growth for the past 12 months is increasing the odds that we may not see a new home price peak this year, for the first time in the history of our listing data, which dates back to mid-2016, and this is likely welcome news to home shoppers," said Danielle Hale, Chief Economist for Realtor.com. "Despite stalling price growth, home listing prices are up slightly compared to last May, and with rates more than a percentage point higher than a year ago, buyers continue to face affordability headwinds. The good news for sellers is that buyers are still out there, and this month's slower growth in the active inventory of homes for sale indicates that shoppers are in the market and actively searching for homes that fit their needs and budget."
What it means for homebuyers, sellers, and the housing market
A slower housing market means buyers in certain areas may find they can once again have an offer accepted when putting less down. A recent report from Realtor.com found down payments declined for the first time since the second quarter of 2020, suggesting it's getting harder for buyers to keep up with costs and that a less competitive housing market may be opening up opportunities for buyers making somewhat smaller down payments.
"As buyers' budgets are being stretched to the max, there are opportunities for negotiation, especially on homes that have been sitting on the market for a while," said Realtor.com Executive News Editor Clare Trapasso. "They can ask sellers to come down on the price, make costly repairs, as well as contribute to their closing costs or buy down their mortgage rates. If they're purchasing new construction, they can also request upgrades. This can add up to substantial savings."
May 2023 Housing Metrics - National Data
Home price growth stalls
Home listing prices were slightly higher in May compared to a year ago, but growth in the typical asking price of for-sale homes continued to decline to the low single digits. In addition, the median listing price on a square foot basis declined compared to last year for the first time in Realtor.com® data history. At this rate of slowing, asking prices are likely to decline relative to the previous year by next month. Despite this trend, home sellers continue to have high expectations of the housing market and buyers, in some cases, too high. The number of homes with price reductions - a sign that a seller needed to adjust pricing to attract a buyer - was higher than year ago levels but in line with pre-pandemic years.
Inventory tightens as fewer sellers list and buyers compete over remaining homes
The U.S. supply of active homes for sales continued to grow in May relative to this time last year, but slowed for the third month in a row as fewer potential sellers opted to list their home for sale and as the market lapped the period of higher inventory growth that started in May 2022. Today's buyers are grappling with low inventory, but the slowing growth in active inventory in May indicates that buyers continue to search for and find deals. Despite sitting on relatively high home equity, sellers are staying on the sidelines, and the number of newly listed homes remains well below last year's level. In fact, the pace of new home listings in May was even lower than in May 2020 when the real estate market was still contending with pandemic-era closures and restrictions.
More days on market gives buyers time to search for homes and bargain
In May 2023, the typical home spent two weeks longer on the market than the same time last year, but a shrinking difference since January's recent high suggests buyers are out shopping for homes and competition still exists. That's keeping sellers in a very good position, with well-priced, updated homes still attracting buyers and selling more than a week faster than was common before the pandemic.