Sticky mortgage rates and inflation pressures are challenging the resilience of the spring housing market. Still, buyers are getting a benefit, as home prices in May recorded their sharpest annual decline in at least nine years.
The national median listing price has now declined for seven straight months. In May, it dropped 2.4% year over year to $429,500, marking the largest annual decrease in Realtor.com® data going back to 2017, according to the latest monthly housing market trends report.
At the same time, the median price per square foot—which reflects home value relative to size—fell 2.5% compared with the previous year. This decline was seen across 35 of the 50 largest housing markets.
Meanwhile, homes going under contract, meaning buyers and sellers have agreed on a deal that has yet to close, increased for the sixth consecutive month, rising 4.3% year over year.
Realtor.com® senior economist Jake Krimmel says these patterns align rather than conflict. “Sellers are pricing to sell rather than pricing to test the market. Buyers, despite rates remaining higher than expected, are still showing up when prices are within budget,” he explains.
He adds that despite the noticeable price declines, the housing market is not approaching a crash. Supporting this view is additional pricing behavior in the data.
Sellers shift toward more realistic pricing
In a weaker market, sellers typically list high initially and later reduce prices significantly to attract buyers. However, in May, the share of listings with price reductions dropped by 1.6 percentage points year over year to 17.5%. According to Krimmel, this reflects a shift in strategy: instead of overpricing and cutting later, sellers are increasingly setting realistic prices from the beginning based on current conditions.
Real estate agent Victor Currie of Douglas Elliman Real Estate in Los Angeles echoed this view, saying, “While the pandemic times encouraged sellers to shoot for the stars with pricing, those days are in the rearview mirror now, and I’m a big believer in pricing accurately. If a home is priced well for the market, it will sell. If it’s overpriced, it’s likely to sit.”
This is a clear contrast to last summer, when sellers held onto outdated pricing expectations while buyers pulled back, widening the gap between both sides and slowing activity.
Lower prices this spring have helped bring buyers back, even with mortgage rates still in the mid-6% range and economic uncertainty linked to the ongoing conflict, now in its fourth month.
Krimmel notes, “Many markets and most regions have been moving in a buyer-friendly direction for some time now, and that is certainly reflected in sellers’ asking prices right now.” Fresh listing data also shows continued demand strength, with new listings up 2.1% year over year—the highest level for May since 2022.
Currie adds that many homeowners have delayed selling due to low mortgage rates, but more are now being pushed into action due to life changes, job moves, or affordability shifts into lower-cost areas.
Markets with the largest price declines
At the metro level, the biggest year-over-year drops in median listing prices were recorded in Memphis, TN (-13%); Buffalo, NY (-11.6%); Austin, TX (-9.5%); and Los Angeles (-7.9%).
Austin stood out in particular, with its median price per square foot falling 8.3%. Homes are also taking longer to sell, with the typical listing now spending about 10 more days on the market than a year ago.
Krimmel describes Austin’s trend as a correction, partly caused by supply exceeding demand in a market with high inventory. However, Realtor.com data shows the metro still recorded nearly 8% more sales through April compared with the same period in 2025, indicating that properly priced homes are still moving.
Three of these metros, excluding Memphis, saw fewer listings with price reductions compared with May 2025. Memphis showed a different pattern. About 22.3% of listings had price cuts, up from last year, while contract activity and pending sales both declined. Krimmel says this points to a cooling and stagnating market rather than one where lower prices are stimulating demand.
In Los Angeles, where the median listing price reached $1.1 million in May—the second highest among the top 50 metros after San Jose—Currie says the typical seasonal spring surge did not occur this year despite more disciplined pricing from sellers.
However, he notes that the luxury segment behaves differently, with high-end buyers focusing more on what fits their budget at the time of purchase. He also adds that Los Angeles is not significantly overbuilt, meaning major price declines would likely require a substantial economic shock.
Outlook for the summer housing market
Although geopolitical tensions and economic pressures have weakened confidence and purchasing power, preventing a strong spring surge, Krimmel says the market has remained stable overall. Buyers and sellers have largely adapted to higher interest rates and ongoing uncertainty. Still, he cautions that this balance could shift.
Heading into June, he highlights contract cancellations and delistings as key indicators to monitor. A noticeable increase in either could signal growing stress and a slowdown in activity.
So far in 2026, cancellation rates have remained lower than in recent years. If that trend continues through June, Krimmel says it would suggest that uncertainty is affecting sentiment and borrowing costs, but not yet translating into weaker transaction volumes.
He also points to supply conditions in the Northeast and Midwest as another important factor. Continued growth in listings in these historically low-inventory regions could indicate that the market is moving toward normalization.
Despite ongoing uncertainty, Currie remains optimistic, saying, “I’m very hopeful for the summer market. That missing spring bump may end up coming in July this year.”
