March Sees Largest Annual Drop in U.S. Home Prices in Over a Decade
In March 2023, the median home price in the United States experienced a significant decline of 3.3%, dropping to $400,528, according to data from national property broker Redfin. This marks the most substantial year-over-year decrease since 2012.
The decline in home prices was particularly pronounced in pandemic boomtowns and high-priced Bay Area markets. Boise, ID, witnessed the most significant drop in prices, with a staggering decrease of 15.4% compared to the previous year.
Following closely were Austin, TX (-13.7%), Sacramento, CA (-11.9%), San Jose, CA (-10.5%), and Oakland, CA (-9.7%). Boise also saw a substantial decline in pending home sales, plummeting by 78.8% year-over-year. Nationally, pending sales dropped by 26.6% on a seasonally-adjusted basis, reaching the lowest level since the onset of the pandemic in April 2020.
Shauna Pendleton, a Redfin real estate agent in Boise, noted the sudden quietness in the market following the collapse of Silicon Valley Bank. She explained, “That killed the buyer momentum that had been building and brought us right back to where we were last year when mortgage rates shot up. There’s this fear that everything will crash.”
Despite the market slowdown, Pendleton highlighted that it’s actually a favorable time to buy in Boise, with falling prices and many sellers, particularly homebuilders, offering concessions.
The housing markets in pandemic boomtowns and expensive coastal areas are slowing rapidly due to overheated prices in recent years. However, markets that didn’t experience as much heat in previous years are holding up relatively well. Pending sales fell the least in Fort Worth, TX, Dallas, Indianapolis, Cincinnati, and Buffalo, NY.
Additionally, some markets, such as Milwaukee, El Paso, TX, Omaha, NE, Camden, NJ, and Knoxville, TN, saw prices rise by more than 10% year over year in March.
In Nashville, while the housing market has cooled from its pandemic peak, demand remains stable. Prices have increased by about 1% from a year ago, with pending sales experiencing a slightly lower decline compared to the national average. Local Redfin real estate agent Jennifer Bowers commented, “Nashville’s housing market is steady,” attributing the stability to factors like job opportunities, affordability relative to other parts of the country, and a steady influx of newcomers.
Housing Inventory Shortage Persists Amidst Decreased Buyer Activity
Despite a decrease in buyer activity, the housing market continues to grapple with an insufficient supply of homes for sale, driven in part by elevated mortgage rates. In March, new listings plummeted by 23.3% year-over-year, marking the lowest level on record aside from the onset of the pandemic, on a seasonally-adjusted basis.
The reluctance of many homeowners to sell can be attributed to various factors. For some, moving would entail securing a higher mortgage rate for their next home purchase, given the surge in average 30-year-fixed mortgage rates to 6.54% in March, up from 4.17% a year earlier. Others are opting to stay put, having already purchased their dream homes in recent years or fearing the challenge of finding another suitable property amidst the scarcity of listings.
The shortage of homes on the market is not only hindering sales but also preventing significant declines in home prices, thereby fueling bidding wars in certain markets. In March, over 44% of home offers written by Redfin agents faced competition, maintaining a consistently high level over the past five months following a period of consecutive declines.
Dan Close, a Redfin real estate agent based in Chicago, shared insights into the intensifying bidding wars, stating, “Low inventory is driving the market and causing bidding wars to intensify.” He recounted instances where listings garnered multiple offers even before hitting the market, emphasizing the fervent demand among buyers.
Similarly, Jennifer Bowers, a Nashville agent, highlighted the challenges faced by both buyers and sellers amidst fluctuating interest rates. She recounted a scenario where a seller withdrew their listing upon discovering that their interest rate would double, underscoring the apprehension among homeowners about relinquishing favorable mortgage terms.
March witnessed approximately 55,000 home-purchase agreements being canceled, equivalent to 14.8% of homes that went under contract. While this figure represents a decrease from the peak observed in October 2022, it reflects an increase compared to the same period last year.
Commenting on the subdued spring homebuying season, Redfin Chief Economist Daryl Fairweather remarked, “There are some signs of the typical seasonal uptick…but that’s partly because there are so few new listings.” Despite expectations of heightened buyer activity during this period, the constrained housing inventory continues to impede market dynamics.
Metro-Level Insights: March 2023
Pending Sales: Notable declines in pending sales were observed across various metros in March 2023. Boise experienced the most significant drop, plummeting by 78.8% year over year, followed by Baton Rouge, LA (-66.3%), Allentown, PA (-60.8%), Honolulu (-56.6%), and Greensboro, NC (-53.4%). Conversely, the smallest declines were witnessed in Fort Worth (-2.6%), Dallas (-4.3%), Indianapolis (-5.3%), Cincinnati (-8.7%), and Buffalo (-12.2%).
Closed Sales: San Jose saw a substantial decline in closed sales, decreasing by 39.1% year over year. Similarly, significant declines were noted in San Francisco (-39%), Oakland (-38.7%), New York (-37.2%), and Portland, OR (-36.9%). On the other hand, closed sales experienced the least decline in North Port, FL (-3.4%), Dallas (-3.5%), Indianapolis (-5.2%), Grand Rapids, MI (-5.6%), and Fort Worth (-7.8%).
Prices: Median sale prices witnessed declines in 37 metros compared to the previous year. The most notable decreases were recorded in Boise (-15.4%), Austin (-13.7%), Sacramento (-11.9%), San Jose (-10.5%), and Oakland (-9.7%). Conversely, the most significant increases were observed in Milwaukee (11.7%), El Paso (11.1%), Omaha (10.7%), Camden (10.2%), and Knoxville (10.2%).
Listings: New listings experienced substantial declines from the previous year in various metros, with Allentown (-57.1%), Boise (-55.2%), Stockton, CA (-46.8%), Greensboro (-46.5%), and Sacramento (-44.8%) being the most affected. Conversely, new listings rose only in Charlotte, NC (4.3%), while experiencing the least decline in North Port (-0.2%), McAllen, TX (-2.3%), Austin (-3%), and Fort Worth (-4.1%).
Supply: Active listings saw significant increases from the previous year in metros like North Port (90.7%), Austin (65.8%), Nashville (58.7%), Fort Worth (54.3%), and New Orleans (50.6%). Conversely, notable declines were observed in Allentown (-41.7%), Cincinnati (-34.8%), Greensboro (-34.3%), Lake County, IL (-29%), and Milwaukee (-28.1%).
Competition: The level of competition in the housing market exhibited notable changes. Las Vegas experienced a drastic decline in competition, with only 26.5% of home offers facing competition, down from 74.8% a year earlier. Conversely, competition rose in Worcester, MA (4.5 ppts), while experiencing the least decline in Washington, D.C. (-4.1 ppts), Detroit (-5.6 ppts), Atlanta (-5.8 ppts), and Baltimore (-7.2 ppts).
