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The U.S. housing market is experiencing a significant shift, with home price appreciation cooling for the third consecutive month and the balance of power moving from sellers toward buyers. This change is highlighted by a 3.3% annual increase in the median home sale price to $298,800 in November, breaking a 77-month streak of gains exceeding 4%. The slowdown is driven by rising mortgage rates and growing inventory, creating new opportunities for prospective homebuyers. Based on our experience assessment, sellers who price their homes competitively are still finding success, while those holding out for peak prices may see their properties linger on the market.
The primary factors cooling the market are higher financing costs and an increase in the number of homes available for sale. In November, the average mortgage rate was 4.9%, a full percentage point higher than the 2012-2017 average. This has reduced purchasing power for many buyers, leading to an 8.3% year-over-year decline in completed home sales—the largest drop in over two years. Concurrently, the supply of homes has grown; the number of homes for sale in November increased by 4.9% compared to a year earlier, marking the eighth straight month of inventory growth. This combination of lower demand and higher supply is the fundamental reason for the moderating price growth.
The national trend masks significant local variations. The shift is most pronounced in several major metropolitan areas where inventory has surged, giving buyers more choices and negotiating power.
In these markets, the rapid price growth of recent years has stalled. For example, San Francisco saw a slight price decline of 0.7%, and the median list price-to-estimated value ratio—a metric that compares a home's asking price to its projected market value—was just 94.6%, indicating sellers are listing below estimates. Conversely, inventory continues to fall in markets like Philadelphia (-24.0%) and Camden, NJ (-19.8%), where conditions may still favor sellers.
The intensity of competition has noticeably decreased. Fewer homes are selling above their list price and at an accelerated pace. In November, only 19% of homes sold above the asking price, down from 22.2% a year ago. The share of homes that went under contract within two weeks also fell to 24.5%, compared to 26.9% in November 2017. While some competitive pockets remain—like San Francisco, where 60.9% of homes sold above list price—the overall market is normalizing. Price drops, which occur when a seller reduces the initial listing price, also declined slightly from an October high to 24.6% in November, suggesting sellers are beginning to adjust their initial pricing strategies more realistically.
For buyers, this environment offers a welcome respite from the frenzied bidding wars of the past few years. With more homes to choose from and less pressure to make immediate offers, there is more time for due diligence and negotiation. For sellers, success now hinges on pricing strategically from the start. Homes that are priced in line with current comparable sales and a home's estimated value are attracting buyers.
The key takeaway is that the market is recalibrating. Buyers are gaining leverage, but a healthy pace of sales continues for well-priced properties. Sellers must understand their local market dynamics—whether it is a rapidly cooling market like Seattle or a steadier one like Tampa, which saw a 7.2% sales increase. Pricing your home competitively from day one is more critical than ever to avoid extended market time.
