America’s hot real estate market may finally be coming back to Earth.
After years of bidding wars, high interest rates, record high prices and buyers getting price cuts, retailers across the country are lowering expectations as home prices post their biggest drop in nearly a decade. And with the next few twists and turns, shoppers run back inside.
For frustrated house hunters, the long-awaited renovation appears to be opening up an opportunity.
The national median listing price fell 2.4% in May from a year earlier to $429,500, according to the latest real estate report from Realtor.com. It marks the biggest annual decline since the company began tracking the data in 2017 and extends a seven-month streak of declining asking prices.
Even with mortgage rates holding above 6.5%, inflation still weighing on the domestic budget and growing uncertainty related to the ongoing conflict in the Middle East, consumers appear to be more eager than many economists expected. Pending home sales rose 4.3% from a year ago, leading to a sixth straight month of gains, while new construction reached its highest level for May since 2022.
“Those two situations are not mutually exclusive,” said Realtor.com chief economist Jake Krimmel. “Sellers have a sales price instead of making market-testing prices. Buyers, despite prices that are always higher than expected, still show up when prices are within budget.”
In other words, the market is not collapsing. It is finally behaving like a market again.
Rather than looking for a hedge with pandemic-era price tags, retailers are increasingly coming to terms with the new reality. The share of listings with price reductions actually fell to 17.5% in May, suggesting that landlords did their homework before putting up a “For Sale” sign instead of chasing fake numbers and cutting them later.
“While pandemic times encourage sellers to shoot for the stars with prices, those days are in the rearview mirror now, and I’m a big believer in fair pricing,” said Victor Currie, a real estate broker with Douglas Elliman in Los Angeles. “If the house has the right price in the market, it will be sold, if it is too expensive, it is possible to stay.”
Some markets feel more volatile than others.
Memphis led the country’s largest decline in home prices, down 13% from last year, followed by Buffalo at 11.6%, Austin at 9.5% and Los Angeles at 7.9%.
Austin, once one of the poster children of America’s housing boom, is now experiencing one of its sharpest trends. After all, it was a notorious market during the violence. Home prices measured on a square foot basis fell 8.3%, while properties stayed on the market longer than last year.
However, consumers have not disappeared. Sales activity in the Texas capital remains surprisingly strong as lower prices tempt buyers back into the market.
Los Angeles tells a similar story.
“Between the Iran war, tax issues, inflation, and high interest rates, many consumers are feeling uncertain and are pulling back, or at least being more cautious,” Currie said.
However, he believes that the region’s luxury market remains unchanged from the dramatic recovery.
“Buyers in our high-priced market are really looking at what they can afford at the time they’re looking. Prices can fluctuate a bit, but we’re not an overdeveloped market so it would take something very difficult to happen in the economy for prices to drop significantly,” he said.
Another big change is happening behind the scenes. Many homeowners who are stuck with extremely low mortgage rates during the recession seem to be deciding that they can’t wait any longer to move.
“Many sellers have been on the fence for a long time due to low mortgage rates, so we may be starting to see more people finally hitting the ‘selling’ stage of their lives, whether that’s due to a change in careers, living conditions or moving to a less expensive market,” said Currie.
The result is a housing market that suddenly looks very different from the hustle and bustle Americans have grown accustomed to over the past few years. Consumers have many options. Sellers have less power. And the era of simply naming your price may finally be over.
Whether that balance holds over the summer remains the billion dollar question.
“So far in 2026, cancellations have remained lower than a few years ago,” Krimmel said. “If that continues until June, we can say with more certainty that the uncertainty of the Iran war is coming down differently than last year’s tax panic: it is felt in prices and sentiment, but not yet in the behavior of commodities.”
