For years, the U.S. housing market has been running hot, defined by bidding wars, skyrocketing prices, and scarce inventory. Brock and Lori Harris, a husband-and-wife real estate agent duo in Los Angeles, have had front-row seats to that frenzy. But recently, they’ve noticed a shift.
Homes that once attracted multiple offers after crowded open houses are no longer moving so quickly. “In years past, we would have packed open houses and then get 15 offers,” Lori Harris explained. “Now, we sometimes still have packed opens but only get one offer.”
Los Angeles isn’t alone. Across the country, the fever that gripped housing in the wake of the pandemic appears to be breaking. Buyers, weary of high mortgage rates, steep insurance premiums, and stubbornly expensive listings, are stepping back. Even those still in the hunt are taking more time and hunting for bargains, giving them more leverage and weakening sellers’ once-iron grip on the market. “It feels like buyers are the most cautious they’ve been since the beginning of Covid,” said Brock Harris.
Early signs of a slowdown
The cooling is showing up in the numbers. According to Zillow, more than one in four home sellers reduced their asking price in June — the highest share for that month since at least 2018. Builders, too, are struggling to attract buyers, with the National Association of Home Builders reporting that 66% of firms have resorted to sales incentives, the highest level in the post-Covid era.
But, as is always true in real estate, geography matters. ICE (Intercontinental Exchange) found that more than 30% of major markets have seen prices dip at least 1% from recent highs. Florida stands out as the clearest example of the reversal: after surging during the pandemic, its market has cooled dramatically, with 85% of counties showing annual price declines. “Overall, I would call this a buyer’s market,” said Sharon Ross, a Delray Beach agent. “We’ve got heavy inventory.”
Florida isn’t alone. Texas has also seen steep price cuts, while parts of California, Arizona, Colorado, and Idaho have all recorded drops of more than 3%. Still, the slowdown isn’t uniform. Some areas in the Northeast and Midwest are continuing to see prices rise, albeit more slowly than in past years.
For many sellers, the reality check has been difficult. Ross said some of her clients are shocked by the lack of interest their properties receive. “I’ve had three single-family houses that all canceled their listings because they could not get the price they wanted,” she said. “The challenge is managing their expectations.”
What’s driving the cooling?
Economists say affordability is only part of the picture. While elevated home prices and mortgage rates remain key headwinds, economic uncertainty is also playing a role. “It’s not just a story about mortgage rates and affordability,” said Daryl Fairweather, chief economist at Redfin. “There is hesitancy to make a big financial commitment when there is so much economic uncertainty going on.”
Fairweather noted that concerns about job security are weighing on buyers, with a recent weak jobs report adding to anxiety about a deeper slowdown. “If you lose your job, it can be really scary that you might not be able to find another one that allows you to keep paying your mortgage,” she said.
The rental market is another factor. For much of the past year, rents had been slipping, reducing the urgency for tenants to buy. “If you’re looking at a one-bedroom condo versus a one-bedroom apartment, it’s going to be pretty obvious that the monthly payment is going to be a lot lower for the apartment in most places,” Fairweather explained. Recently, however, that trend has reversed, with median asking rents climbing 1.7% year-over-year in July — the sharpest increase since January 2023.
Waiting on the Fed
Many potential buyers are also in wait-and-see mode, hoping that the Federal Reserve will soon cut interest rates and ease borrowing costs. “Everyone thinks that the Fed rate cut is when they need to buy,” said Sandy McAlpine, a real estate agent in Charlotte, North Carolina.
Mortgage rates have in fact been edging down in anticipation of a September rate cut, with Freddie Mac reporting that the 30-year fixed mortgage averaged 6.58% last week, the lowest level in 10 months. But there are no guarantees. As McAlpine pointed out, when the Fed began cutting last fall, mortgage rates actually went up.
While the Fed doesn’t directly set mortgage rates, its actions affect the 10-year Treasury yield, a key benchmark for home loans. Redfin expects rates to ease further into next year, but Fairweather warns that nothing is certain in a shaky economy.
For buyers who have been waiting, though, the current moment may offer a unique window of opportunity. “There is this kind of window that buyers didn’t have before, where they are able to negotiate better prices and mortgage rates aren’t as high as they were earlier in the year,” Fairweather said. “For buyers who have been on the sidelines, now might be a good time to take a second look.”
