Weakening Home Sales Suggest a Post-Pandemic Cool Down

National home sales are showing signs of weakness after a market boom during the pandemic. Over a four-week period ending May 2, home sales fell 3%, according to a new report from Redfin analyzing home sales. In the subsequent four-week period ending May 28, housing prices also fell $2,500 to a median of $354,975. These trends could indicate the housing market is cooling.

New home listings also fell. From the four-week period ending May 2, new home listings decreased 8% from the same time in 2019 and 37% from the same period in 2021, when the housing market was taken off. Home listings are also down 5% from the peak in 2021. Overall, houses are staying on the market longer and past bid-review dates, and homes are either getting fewer offers than in the spring or in some cases only a single offer, according to Seattle Redfin real estate agent Alysan Long.

Mortgage applications are another indication that the market is showing retreating demand. For the four-week period ending May 28, mortgage applications were down 3%, paralleling the decrease in new home sales. However, mortgage applications were up again through June 3, increasing 2.99%.

Although these metrics show signs of a changing market, housing demand is still operating at record levels. Yes, asking prices did decrease, but they are still up 11% from the same period in 2020. Likewise, home sales may be down compared to the same period in 2019, but they are up 38% compared to 2020. Last month, housing activity was history making, according to the report. Median home prices were a record high of $355,558, up a record 24% from 2020, and 52% of homes sold for more than their list price, up from 26% the same period a year earlier—another record. The average home sold for 2% above the list price, and homes sat on the market for an average of 16 days, a record low. Overall, this indicates continued strength in the housing market, making it unclear if the recent decrease in home sales is a fluke or the beginning of a turning tide.

The Redfin report analyzed more than 400 US metros to arrive at these overarching housing trends, but a micro analysis shows that demand has favored smaller metros through the pandemic. A report from Zillow released earlier this year shows that mid-sized markets, especially in the Midwest, are making up for softness in New York and San Francisco. In the process, the for-sale market in urban areas was on pace with or slightly ahead of red-hot suburban areas.

Specifically, St. Louis, Cincinnati, Cleveland, Kansas City, Columbus and Indianapolis are among the metros where urban home values have recently been growing faster than those in the suburbs.