Homebuying activity in the United States experienced a slowdown in July, with sellers increasingly resorting to price reductions to stimulate demand. This shift comes after a strong spring and early summer market, as rising borrowing costs deterred potential buyers and led to a backlog of unsold properties.

The share of homes listed with price cuts rose to 20% in July, a level comparable to the previous year. This marks an increase from the preceding months, where sellers had largely adopted more realistic pricing strategies from the outset. In the first half of the year, price cuts were nearly 2 percentage points lower than in the prior year, reflecting a market where sellers aimed to avoid listings becoming stale.

"We are seeing the housing market run up against some headwinds, especially on the mortgage rate front, at the exact time when buyer demand starts to dip seasonally," said Jake Krimmel, a senior economist at Realtor.com. "So while the realistic pricing narrative is still there, the story has weakened a bit recently."

Month-over-month, the percentage of listings with reduced prices increased from 18.8% to 20%. Krimmel noted that July's data may indicate softer demand than sellers are anticipating, a trend that will be closely monitored as summer progresses.

Regional differences were apparent, with the Northeast and Midwest seeing the fewest price cuts at 13.7% and 18.7% of listings, respectively, attributed to tight inventory and robust demand. Conversely, the West and South regions offered more opportunities for discounted properties, with 21.9% and 21.3% of listings, respectively.

However, early signs of market softening are emerging even in the Northeast and Midwest, where the share of price-reduced listings saw a slight uptick compared to July of the previous year.

Metro Areas See Highest Price Reductions

Twelve of the 50 largest U.S. metropolitan areas experienced price cuts on more than a quarter of their homes in July, with the majority located in the West and South. Portland, Oregon, led the nation with 31% of listings seeing price reductions, followed by Denver, Colorado, at 30.9%. Dallas and Austin, Texas, both recorded 28.3% of listings with price cuts.

Cory Culpepper, an agent with Douglas Elliman in Austin, attributed price cuts to sellers listing properties above market value, either in anticipation of lower offers or to cover buyer closing costs. Another factor, he noted, is sellers who adjust their pricing based on competing properties without adequately preparing their own homes for sale.

Culpepper cautioned that listing a home too high initially, with the expectation of later price cuts, can deter discerning buyers, particularly in markets with ample inventory. "The cons outweigh the pros because sellers take a huge risk of ‘testing the market,’ only later to find their property with too many days on the market and now becoming the problem house," he stated.

He added that a significant number of days on market can lead buyers to question a property's value. Nevertheless, buyers are currently leveraging these price cuts in areas like Austin to negotiate better deals, which can also benefit sellers.

"At the end of the day, a smart seller and buyer typically find a win-win," Culpepper said. "We are able to negotiate a lower amount and/or closing costs for the buyer to achieve a lower interest rate, which is crucial right now, and the seller is happy, since they technically net the same they would with a much lower offer."

Krimmel echoed this sentiment, suggesting that if price cuts result in more sales and maintain reasonable market times, they signify a market shift towards buyers rather than an outright decline.

Economic Factors Influence Housing Market

Broader economic and geopolitical factors are also influencing the summer housing market. Persistent inflation fears, exacerbated by ongoing international conflicts, have contributed to rising oil prices. The Federal Open Market Committee's decision in July to maintain the federal funds rate between 3.50% and 3.75% and signal potential future hikes to combat inflation led to an increase in the 10-year Treasury yield. Consequently, the average rate for 30-year fixed home loans reached 6.66%, a year-high.

Krimmel explained that while the spring market showed resilience, these conditions may impact the summer more significantly, a period typically marked by lower demand. An earlier forecast for mortgage rates around 6.3% for the remainder of the year was based on easing geopolitical tensions. However, renewed conflict and rising oil prices could make this outlook overly optimistic.

Overall, the monthly housing data suggests a plateauing market rather than a sharp downturn. Asking prices saw a month-over-month decrease, settling at $428,950, down 2.4% from July of the previous year. The typical home spent 57 days on the market, one day less than the year prior, indicating the first annual decrease in market time in over two years. While active listings saw a slight increase, new listings remained flat year-over-year after exceeding 2025 levels through the spring.

"When the weather gets hot, market activity cools," Krimmel concluded.