Market Moods: Prices dropping, but not all markets got the memo
Two recent reports showed median U.S. home prices dropping year-over-year in February, the first such drop in a decade. But the local view varies.
- In Austin, local buyers and sellers who were spooked by the pandemic-fueled market are beginning to reach out.
- The key in Maine is managing expectations and digging harder for off-market listings.
- Prices are up in Nebraska but sellers are staying on the sidelines.
Editor's note: Numbers don't lie, but they don't always tell the whole truth. Market Moods looks at data from the perspective of agents across the U.S. — the people who know what's really going on at the local level.
For the first time in over a decade, median U.S. home prices fell year-over-year.
NAR's existing homes report for February showed median prices off 0.2% from 2022. The tiny drop ends a streak of 131 consecutive months of increases, the longest on record according to NAR. Meanwhile, Redfin reported median prices fell 1.2% year-over-year, the first drop since 2012.
But not every market got the price-drop memo.
Back to reality in Austin after a "unicorn" year
"It took a while but reality has set in with the amount of inventory that's flooded the market," says Austin, TX, luxury specialist Crystal Olenbush, with AustinRealEstate.com.
Austin was one of the metros with the deepest decline, according to Redfin, with prices down 12.4% year-over-year.
Price superheated during the COVID-19 pandemic because Austin was a top draw for remote workers looking to relocate, Olenbush says.
"(2021) was the most abnormal, unicorn year we'll see in our lifetime," Olenbush says. "Prices as much as doubled in some parts of Austin at the height of the pandemic frenzy."
This year, prices have dropped as much as 20% to 25% in some parts of Austin because they were overinflated, she says.
Before "we were getting a ton of out-of-state people coming in," she said. Now "all of our buyers in our current market are local."
Local buyers and sellers who were spooked by the pandemic-fueled market are beginning to reach out now, she says.
"We have so much inventory and a ton of buyers out there but nobody is in a hurry to buy," she says. "Unless they're getting a deal."
Still, Olenbush doesn't see the drops continuing.
"We've reached a level where people have dropped as low as they're going to drop," she says.
Maine mirrors national numbers
"We're experiencing what everyone else is experiencing," says CJ Dubois Cote, an agent with Keller Williams Realty in Portland, Maine.
Even though interest rates have more than doubled in a year, she says, "prices haven't really come down."
Instead of big price cuts, the change in the market is showing up in different ways.
During the height of the market, "We never saw VA loans or FHA loans," she says. "People were waiving inspections. And a sale of property contingency? Forget about it."
Now non-conventional loans and contingencies are coming back. But people continue to pay above the listing price for certain properties.
"We don't have the inventory that we need for the demand that's out here currently," she says.
Also, so many Mainers are "trapped" by low existing mortgage rates or unable to sell their home because they can't find a new one, Dubois Cote says. That means agents who want to make sales work harder to find off-market listings. They also check with other agents to know what's coming online.
The best thing agents can do is educate clients and help them understand their local conditions. "Set the expectations," she says.
Omaha didn't get the price-drop memo
Prices may be slipping in most places, but a few metros like Omaha, NE, aren't joining the crowd. Omaha prices rose 11.8% year-over-year in February.
Alex Heyen with Flatwater Realty in Omaha says part of the reason is that prices didn't skyrocket in the pandemic. "We saw a larger-than-normal increase but not to the extent that Austin or California or Florida did," he says. "Nebraska's just a really stable place."
Inventory is also an issue.
"We still have low inventory at all price ranges," says Kathy Wickstrom with Nebraska Realty. "At under $300,000, there are multiple offers and people paying $20,000 to $30,000 over ask – I know because I've written them."
Buyers also are agreeing to contracts with unlimited appraisal differences, she says.
While rising interest rates typically result in lower prices, the opposite is happening in Nebraska. Sellers are staying out of the market because of higher rates, says Heyen of Flatwater Realty.
"If your current interest rate is 2.5%, 3%, it doesn't make sense to (sell) and take on a 6.5% or 7% rate on a new home," he says.
Meanwhile, buyers have gotten over the initial shock, he says. "At first people were thinking, 'I'll wait until it comes back to 3% to buy," he says. "I think everyone realizes that's not happening. Most people are just coming to accept that it's the new norm."