Home prices begin to cool as active listings jump 35%

A townhouse for sale in the Upper East Side neighborhood of NYC. Adam Jeffery | CNBC

Some of the heat is coming out of home prices, even though they're still higher than they were a year ago.

Several new reports show the price gains are shrinking and home sellers are starting to give in after a stagnant spring market.

For the first time since the start of the Covid-19 pandemic, when home sales ground to a halt, the typical home sold for slightly less than its asking price — 0.3% lower — during the four weeks ended June 23, according to real estate brokerage Redfin. A year ago at that time the typical home was selling at list price. Two years ago it was selling at about 2% above list price.

That's not to say that the housing market is crashing. A little less than two thirds of homes still sold over asking price in the last month; that is, however, the lowest share since June 2020. While most sellers are still listing their homes at higher prices than comparable homes sold for a year ago, some are conceding that they simply can't command those prices.

Mortgage rates remain stubbornly high, with the average rate on the 30-year fixed mortgage stuck just above 7% for the third straight month, according to Mortgage News Daily.

The much-watched S&P Case-Shiller index showed home prices in April up 6.3% from April 2023. May's prices continue that trend. Home prices are now 47% higher than they were in early 2020, with the median sale price now five times the median household income.

CNBC got an exclusive, early look at home price data coming out next week from a different index by ICE Mortgage Technology. It shows annual home price growth slipped to 4.6% in May from 5.3% in April. That is the slowest growth rate in seven months.

Supply is starting to build, which is leading to the cooling in prices. Total active listings are now 35% higher than they were at this time a year ago, according to Realtor.com. To put that in perspective, however, even after the recent growth, inventory is still down more than 30% from typical pre-pandemic levels.

"Some buyers think they can get a deal because they're hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition," said Marije Kruythoff, a Los Angeles Redfin agent in a release. "In reality, everything depends on the house and the location."