Hallelujah! Home prices finally dropped

A Christmas miracle arrived early for anyone shopping for homes alongside stocking stuffers: Home prices dropped by 1.4% over the past three months, according to Parcl Labs’ analysis of high-frequency listing data. That means real estate prices have fallen year over year for the first time since mid-2023.

So what’s going on? It largely boils down to mortgage rates, which doubled after the pandemic from the 3% to 7% range as the Federal Reserve began hiking rates.

“The sharp increase in mortgage rates in 2022 and 2023 created an affordability shock: buyers were priced out, sales volumes dropped, and sellers had to adjust expectations,” Parcl Labs co-founder Jason Lewris told CNBC.

For sellers, this “adjustment” didn’t come easy. To entice cash-strapped buyers to make an offer, 18% of sellers slashed their price in November, up 1.3 percentage points from last year. But other sellers, rather than accept this harsh reality, simply yanked their homes off the market. Delistings surged 38% in October year over year and 45% year to date, the highest level of sellers throwing in the towel in three years.

Even though both buyers and sellers have their gripes, the picture varies a lot based on where you live. Parcl found that prices are down annually by 10% in Austin, 5% in Denver, and 4% in both Tampa and Houston. Meanwhile, prices are up 6% in Cleveland, 5% in New York and Chicago, and 3% in Philadelphia.

What’s next? In 2026, many housing forecasts expect a slight increase in prices ranging from 1% to 4%. But since mortgage rates are also anticipated to fall to the low 6% range, monthly housing payments should shrink 1.3%—the first annual drop since 2020.

In other words, the New Year should bring cheery news for both buyers and sellers, proving that the housing market doesn’t have to be a zero-sum game.—JD

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