According to a recent Realtor.com® report, nationwide, the median home listing price fell about 11 per cent from its summer peak to $400,000 in December.
While prices still increased by about 8.4 per cent year-over-year in December, it was the first time in a year that they increased by only single digits.
In another holiday gift to homebuyers, the number of properties for sale nationwide jumped by more than 50 per cent compared to a year ago.
And homes are staying on the market longer, giving buyers the chance to consider whether this is the right home for them, rather than having to make an offer on the spot.
Mortgage rates even dropped from over 7% to the 6% range last month.
Rising interest rates are contributing to the cooling of the housing market as many buyers can't afford higher monthly payments on their homes after rates more than doubled in 2022.
Higher mortgage rates stopped the whiplash price increases and frenzied bidding wars that defined the COVID-19 era of the housing market.
When interest rates were in the 2% and 3% range, many buyers could afford the higher prices because their monthly mortgage payments were low.
However, when interest rates soared, mortgage payments increased - and those higher prices suddenly became unaffordable for many buyers.
Due to a lack of buyers, some 13.6 per cent of sellers lowered their listing prices in December, compared to 7.1 per cent a year ago.
Nine of the 50 largest metropolitan areas saw their median listing prices fall year-over-year in December. New Orleans saw the largest price decline, down 4.4% year-over-year in December. This was followed by Denver (-4%) and Austin, Texas (-3.4%).
Monthly mortgage payments are about 59% more than they would have been in December 2021.
Homebuyers are financially hollowed out, paying nearly $750 more per month for the median-priced home. (This assumes they put 20% down and excludes taxes, insurance and homeowners association fees). This is significantly higher than rising rents and inflation.
At the other end of the spectrum, the largest annual increases in listing prices were in Milwaukee (46.2%), Memphis, Tennessee (34%) and Miami (20.4%).
The first two areas have lower prices, with median listing prices of $375,000 and $325,000 respectively, well below the national price level of $400,000.
Meanwhile, prices continue to rise in Miami, one of the darlings of the pandemic-era real estate market, which has attracted dozens of companies and new residents to relocate to its sunny shores over the past few years. in December, the median listing price in the Magic City metropolitan area was $590,000.
Housing inventory has been at crisis-level lows since the pandemic began, with buyers clamouring for every home that comes onto the market. It seemed that as soon as an attractive property came up for sale, it would be under contract by the weekend - if it even lasted that long.
However, this frenzy has largely disappeared, resulting in more available properties.
Compared to last year, the number of homes on the market in December increased by 54.7%, or 244,000 properties. While this sounds great, it is still a whopping 38.2% less than in the years leading up to the 2017-2019 pandemic.
And, while overall home inventory is on the rise, the number of new listings fell 21 per cent year-over-year in December.
Sellers are reluctant to give up their low mortgage rates, sell their homes and then have to take out new loans at higher rates to buy new homes.
Coupled with fears of a recession, many potential buyers have simply put their home buying plans on hold. This has resulted in more homes staying on the market longer, with a median of 67 days, 11 days longer than in December 2021, adding to the much-needed housing stock.
Home prices are also highest in the Western United States, where inventory is increasing 110.2% annually. Raleigh, North Carolina experienced the largest increase in homes on the market, at 226.2% in December, followed by Nashville, Tennessee at 226% and Austin, Texas at 186.6%.