US home prices slip below year-ago levels for the first time since 2023 as supply builds

The median US home-sale price fell 0.4% from a year earlier to $388,634 in October, the first annual decline since May 2023, according to a monthly report by the brokerage Redfin published on Tuesday, November 10. Two months earlier, prices had been 2.5% higher than a year before.

The report shows prices giving way as demand weakens and the stock of homes for sale grows. Redfin's figures are seasonally adjusted, except for the median sale price and the mortgage rate.

Contracts fell first, then prices

Pending home sales, which count homes that went under contract, fell 3.6% from September to their lowest level since 2013, with the exception of April 2020, Redfin said. They were 15.1% lower than a year earlier.

Redfin linked the drop to borrowing costs: the monthly average 30-year fixed mortgage rate in its data was 7.33% in October, "a three-year high and up from 6.86% the month before." That is 1.08 percentage points above a year earlier, according to the report's data table. Closed sales fell 2.1% on the month, which Redfin said took them to their lowest level in nearly three years.

"It's a buyer's market, but not many people can afford to buy," said Chen Zhao, Redfin's head of economics.

More homes on the market, and more of them marked down

The total number of homes for sale rose 0.9% from September to its highest level since early 2020, according to the report, while new listings fell 1% to the lowest level in more than two years. Months of supply, the time it would take to sell the current stock at the current pace, rose to 4.3.

Sellers gave ground on price:

• 61% of homes that sold in October went for less than their original list price.
• 36% had at least one price cut before selling, the highest share in Redfin's records.
• About 15% of pending sales fell out of contract, the highest share in Redfin's records apart from March and April 2020.

San Francisco and Austin moved in opposite directions

The national decline hides wide gaps. Prices rose from a year earlier in more than half of the 50 most populous metro areas, Redfin said. San Francisco led with a 16.8% increase, the largest since 2018, followed by New Brunswick, New Jersey, at 7.7%.

Prices fell most in Austin, Texas, down 6.5% from a year earlier, followed by Seattle, down 5.1%, and Nashville, Tennessee, down 4.9%. Pending sales fell in every one of the largest metros, by the most in Seattle (28.7%), San Diego (26.6%) and Denver (24.2%) from a year earlier.

Borrowing costs have eased slightly since October. Freddie Mac's weekly survey put the 30-year fixed rate at an average of 7.18% as of November 5, down from 7.24% a week earlier but above 6.22% a year before.

A price dip helps buyers less than the rate costs them

Our reading is that October's decline is a sign of the market adjusting, not yet of homes becoming affordable. A price 0.4% below last year's does little against a mortgage rate about a percentage point higher, and it is the monthly payment, not the sticker price, that decides who can buy.

The opportunity is that supply is rebuilding: more listings, more price cuts and more sales below the asking price give buyers choice they have not had since 2020. The threat is that weak demand meets a growing stock of unsold homes in markets such as Austin and Seattle, while San Francisco shows that local job markets can still push prices the other way. We expect prices to stay soft over the next six to twelve months if mortgage rates stay above 7%. We would change that view if rates fell clearly below that level and pending sales recovered with them. We do not call a bottom.

The view in this final section is FinanceInTime's editorial opinion, for information only. It is not investment, tax, legal or other advice, and it does not take your circumstances into account. Forecasts are uncertain and past results do not guarantee future ones.