Home Listing Prices Post Sharpest Drop in 9 Years as Sellers Face Reality Check

Sticky mortgage rates and rising inflation fueled by the Iran war are testing the limits of the spring housing market's resilience, but there is a silver lining for buyers as home prices in May experienced their steepest annual drop in at least nine years.

The national median listing price has been falling for seven consecutive months, and in May it plunged 2.4% year over year to $429,500, representing the sharpest annual decline in Realtor.com® data going back to 2017, according to the latest monthly housing market trends report.

May also saw the median price per square foot, measuring a home's value relative to size, shed 2.5% from a year ago—a downward trend reflected in 35 of the 50 largest markets.

Meanwhile, the number of homes under contract—signaling that a buyer's offer has been accepted but the deal is not yet finalized—rose for a sixth straight month, jumping 4.3% compared with a year ago.

"Those two trends are not a contradiction," explains Realtor.com® senior economist Jake Krimmel. "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." 

Krimmel stresses that despite the broad and drastic price pullback, the housing market is not on the brink of a crash, and a closer look at price-reduction data reveals why.

Sellers pivot to realistic pricing

According to the economist, in a distressed market, sellers at the outset list high, only to slash prices later and sell well under asking.

In May, however, the national share of listings with price cuts fell by 1.6 percentage points from last year to 17.5%. To Krimmel, this signals a shift toward more strategic pricing: Instead of testing the market ceiling and discounting later, sellers this spring are pricing realistically from the start based on existing market conditions.

"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," Victor Currie, a real estate agent at Douglas Elliman Real Estate in Los Angeles, tells Realtor.com. "If a home is priced well for the market, it will sell. If it’s overpriced, it’s likely to sit."

This marks a sharp contrast to last summer, when sellers held on to outdated price expectations as buyers pulled back, widening the gap between the two sides and stalling the market.

Thanks to lower prices this spring, homebuyers have been coming off the sidelines, despite mortgage rates stuck in the mid-6% and rising, and economic headwinds whipped up by the conflict in the Middle East, now in its fourth month and with no resolution in sight.

"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," says Krimmel.

Data on fresh inventory indicates that buyer demand at the national level remains healthy, with new listings rising 2.1% compared with a year ago, marking the highest level for May since 2022.

"Many sellers have been sitting on the fence for a long time due to having low mortgage rates, so we may be starting to see more people finally hitting the 'need to sell' stage of their lives, whether that’s due to job changes, life circumstances, or moving to a less expensive market," says Currie.

Major metros with sharpest price drops

At the metro level, median list prices saw the sharpest year-over-year declines in Memphis, TN (-13%); Buffalo, NY (-11.6%); Austin, TX (-9.5%); and Los Angeles (-7.9%).

Austin particularly stood out: Its median price per square foot plunged 8.3% while its time on market surges, with the typical home now taking 10 more days to sell than it did a year ago.

Krimmel says that Austin is experiencing a price correction, in part due to housing supply outstripping demand in the inventory-rich metro. Still, the Realtor.com spring progress report showed the bustling Texas hub actually had almost 8% more sales through this April than through April 2025, suggesting that well-priced homes are moving in this ever-dynamic market.

Meanwhile, three of these markets, excluding Memphis, saw a decrease in their share of listings with price cuts compared with May 2025.

Memphis, in contrast, is showing more signs of distress. Prices there were slashed on 22.3% of listings, up from last year. At the same time, contract signings and pending sales were down since last year.

"Memphis looks like a slowing and stagnating market where prices are dropping, as opposed to one where lower prices are causing volumes to pick up or drawing more buyers into the market," says Krimmel.

In L.A., where the median list price in May was $1.1 million, the second-highest across the top 50 metros, trailing only San Jose, CA, Currie says that the typical "spring bump" never materialized this year, despite sellers being more strategic about pricing.

"Between the Iran war, tariff issues, inflation, and higher interest rates, a lot of potential buyers are feeling uncertain and pulling back, or at least being more cautious," says Currie.

However, the agent points out that the luxury tier of the local market behaves differently.

"Buyers in our high-priced market really are looking more at what they can afford to buy at the time they’re looking. Prices can fluctuate a bit, but we aren't an overbuilt market so it would take something pretty drastic to happen to the economy for prices to drop meaningfully," he adds.

How is the summer housing market shaping up?

Although geopolitical and economic headwinds have eroded consumer confidence and buying power, preventing a "slam-dunk" spring market, Krimmel says no major downturn followed, largely thanks to buyers' and sellers' ability to adapt to higher rates and a general climate of uncertainty.

However, the economist warns that their patience may not be endless.

Moving into June, Krimmel identifies contract cancellations and delistings as the two key metrics to watch: A spike in either could signal market stress and a looming slowdown.

"So far in 2026, cancellations have remained lower than the past several years," he says. "If that holds through June, we can say with more confidence that the Iran war uncertainty is landing differently than last year's tariff shock: felt in rates and sentiment, but not yet in transaction behavior."

Another critical factor to monitor is supply in the Northeast and Midwest. If new and active listings continue to grow in these inventory-depleted regions, it will signal that the market is finally normalizing.

Despite the many unknowns hanging over the industry, Currie says he is optimistic.

"I’m very hopeful for the summer market," concludes the agent. "That missing spring bump may end up coming in July this year."