Map Shows Cities With Biggest Drop in Home Sale Prices

The U.S. housing market is experiencing a significant slowdown, with Redfin reporting that while the median U.S. home sale price saw its slowest year-over-year growth since June 2023 at 0.7% in May, cities like Oakland, Jacksonville, and Dallas experienced notable price declines. This deceleration, coupled with active listings reaching a five-year high, homes lingering longer on the market (38 days), and a record high for canceled purchase agreements, signals a significant shift in negotiating power towards buyers. New home construction also slowed, with housing starts at a five-year low, and Redfin projects widespread national price declines by late 2025, indicating continued market cooling amidst affordability challenges.

Analysis

The U.S. housing market is exhibiting clear signs of a significant slowdown, with a notable shift in market power towards buyers. According to Redfin data for May, while the national median home sale price saw its slowest year-over-year growth since June 2023 at just 0.7%, several key metropolitan areas experienced outright price declines, including Oakland (-6.7%), Jacksonville (-5.2%), and Dallas (-4.6%). This cooling is corroborated by supply and demand indicators: active listings reached a five-year high, while the typical time a home spent on the market extended to 38 days, the slowest pace for May since 2020. Demand-side weakness is further evidenced by the share of homes selling above list price falling to a five-year low of 31.2% and canceled purchase agreements hitting a record high for May. The slowdown extends to new construction, with Zillow reporting that housing starts fell to a five-year low and building permits declined. Despite buyers gaining negotiating leverage, Redfin economists note that affordability remains a major challenge, creating buyer hesitancy and leading to a market plateau. This is underscored by Redfin's projection that widespread national price declines could materialize by late 2025.

Key Decisions for Investors

• Investors should reassess exposure to residential real estate, particularly in markets that previously saw rapid appreciation and are now leading price declines, such as those in California, Florida, and Texas.
• For real estate services companies like Redfin (RDFN) and Zillow (Z, ZG), the combination of slowing sales, record cancellations, and buyer hesitancy poses a significant headwind to transaction-based revenues; monitor their upcoming earnings for revised guidance.
• The five-year low in housing starts and falling building permits suggests investors in homebuilder equities should anticipate potential downward revisions to sales and earnings forecasts.
• Given Redfin's projection of potential price declines into late 2025, a cautious or defensive stance on housing-sensitive assets is warranted, as this appears to be a sustained cooling trend rather than a temporary dip.