The U.S. housing market is showing clear signs of cooling, offering a glimmer of hope for buyers who have been priced out over the past several years. Inventory is rising, price growth has moderated, and mortgage rates appear to have stabilized. While it is too early to declare a buyer's market, the dynamics are shifting in a direction that favors prospective homeowners.
Inventory on the Rise
Active listings increased 22 percent year-over-year in June, reaching the highest level since 2019. The inventory buildup is most pronounced in Sun Belt cities like Austin, Phoenix, and Tampa, where pandemic-era price appreciation was steepest. Months of supply, a key metric measuring how long it would take to sell all current listings at the current sales pace, rose to 3.8 nationally, approaching the 4-5 month range traditionally associated with a balanced market.
The increase in inventory is driven by several factors. Homeowners who were reluctant to sell and give up pandemic-era mortgage rates below 3 percent are increasingly listing their properties as life events, job relocations, and rate-lock fatigue override the financial calculus. Additionally, new construction has ramped up, with single-family housing starts up 11 percent year-over-year.
Price Moderation
Median existing-home prices rose just 1.8 percent year-over-year in June, a dramatic deceleration from the 7.4 percent annual growth seen a year ago. In several markets, prices are actually declining on a month-over-month basis. The National Association of Realtors reports that 28 percent of listings had price reductions in June, up from 15 percent a year ago.
"We are seeing the first meaningful shift in bargaining power in years. Buyers have more options and more negotiating room than at any point since the pandemic began," said the NAR chief economist.
Mortgage Rate Stability
The 30-year fixed mortgage rate has stabilized in the 6.2 to 6.6 percent range over the past three months, providing buyers with more predictability in their housing budgeting. If the Federal Reserve begins cutting rates later this year, mortgage rates could drift lower, though the relationship between Fed policy and mortgage rates is imperfect. Some economists expect rates to settle in the 5.5 to 6 percent range by year-end if inflation continues to cool.
Advice for Buyers
For buyers who have been waiting on the sidelines, the current environment offers a more favorable entry point than at any time in recent years. The combination of increased inventory, moderating prices, and stable rates means less competition and more room for negotiation. However, affordability remains stretched by historical standards, and buyers should be cautious about overextending financially.
The key takeaway is that the frenzied market of 2021-2024 is over. Buyers can take their time, negotiate inspections and repairs, and in some markets, even secure seller concessions. This does not mean prices will crash, but it does mean the power dynamic has shifted, and that alone represents a meaningful change.