U.S. Home Prices Fall for the First Time in Three Years as 7% Mortgages Hand Buyers the Upper Hand

For the first time in more than three years, the typical American home sold for less than it did a year earlier. The median U.S. home-sale price slipped 0.4% year over year to $388,634 in October, according to a monthly report Redfin released on November 10. It is the first annual decline since May 2023, and it comes only two months after prices were still rising 2.5%.

The dip is small, but the shift behind it is not. Mortgage rates above 7% have pushed buyers to the sidelines, unsold homes are stacking up, and sellers are finally being forced to meet the market. For investors, landlords, builders and every business that lives off housing transactions, the October data marks a turn in who holds the leverage.

What the October numbers show

Redfin’s report paints a market where demand has cracked faster than supply. Pending home sales, the contracts signed in a given month, fell 3.6% from September on a seasonally adjusted basis. Outside of April 2020, that is the lowest level since 2013. Redfin ties the drop largely to borrowing costs: mortgage rates averaged 7.33% in October, a three-year high and up from 6.86% the month before.

Closed sales also fell 2.1% month over month to their lowest level since December 2023. Meanwhile, the total number of homes for sale rose 0.9% from September to its highest level since early 2020, the biggest monthly gain since May 2025.

Several measures point to buyers gaining bargaining power:

• 61% of homes that sold in October went for less than their original list price, per Redfin.
• 36% of homes sold had at least one price cut, the highest share in Redfin’s records.
• Roughly 15% of pending sales fell out of contract, the highest share on record outside the March-April 2020 pandemic spike.
• New listings fell 1% month over month to their lowest level in more than two years, a sign that would-be sellers are holding back.

Chen Zhao, Redfin’s head of economics, summed it up in the report by calling it a buyer’s market where few people can actually afford to buy, and advised house hunters to treat list prices as a starting point and negotiate on closing costs, repairs and rate buydowns.

A split map: San Francisco up, Austin down

The national figure hides a sharply divided country. Prices actually rose in more than half of the 50 most populous metros, according to Redfin. San Francisco led by a wide margin with a 16.8% jump, its biggest gain since 2018, as AI-driven wealth chases a shrinking pool of listings (active listings there were down 7% year over year). New Brunswick, NJ rose 7.7%, and both New York City and Nassau County gained 4.4%.

At the other end, Austin fell 6.5%, Seattle 5.1% and Nashville 4.9%. Austin and Nashville are among the country’s deepest buyer’s markets after years of heavy building, while Seattle is contending with a shaky tech job market. Pending sales fell in every major metro, with the steepest drops in Seattle (down 28.7%), San Diego (down 26.6%) and Denver (down 24.2%).

Other data points in the same direction

Redfin is not alone. CNBC reported that Realtor.com counted active inventory up 7.4% year over year in October, while Zillow said newly pending sales dropped 16.8% from a year earlier, the slowest October since 2018. Zillow’s chief economist, Mischa Fisher, warned that November is likely to show an even larger contraction but said it may mark the worst of the slowdown.

Financing remains the main obstacle. Bankrate’s national average for a 30-year fixed mortgage stood at 7.22% on November 10, according to the Wall Street Journal’s daily rate tracker, which also noted that futures markets expect the Federal Reserve to raise rates at its next meeting. Freddie Mac’s weekly average eased to 7.18% last week from a 7.40% peak in mid-October, Marketplace reported, but that is still about a full point higher than a year ago.

Why it matters for business and investors

Pricing power has moved to buyers with cash or financing in hand. When a third of sold homes needed a price cut and three in five closed below list, well-capitalized buyers, including small investors adding rentals, can negotiate concessions that were unthinkable two years ago. The catch is that the same high rates squeeze rental cash flow, so deals have to work at today’s borrowing costs, not on hopes of a quick refinance.

Transaction-driven businesses face a lean winter. Brokerages, mortgage lenders, title firms, movers, home inspectors and renovation contractors all earn on volume, and closed sales are at multi-year lows. A record share of deals falling apart also means more wasted work per closing. Companies in these trades will compete harder for fewer customers, which makes responsiveness to every inbound lead more valuable.

Local conditions matter more than the national average. A seller in San Francisco and a seller in Austin are living in different markets. Investors and lenders who price risk off national headlines may misjudge both the hot coastal pockets and the softening Sun Belt metros where inventory has piled up.

Affordability may slowly improve. Redfin notes that wages are growing roughly 4% a year, so even flat or slightly falling prices let incomes catch up. If rates ease even modestly, the large stock of unsold homes gives the market room for a rebound in sales next year, as Zillow’s Fisher suggested.

What to watch next

This week brings October inflation data and the National Association of Realtors’ existing-home sales report, which Realtor.com economists have said is likely to be weak. The next Fed decision matters too: a rate hike would keep mortgage costs elevated into the spring buying season, while any sign of relief could pull sidelined buyers back into a market that now has more homes to choose from than at any point since 2020.

For now, October’s 0.4% dip is less a crash than a reset. After 13 years of almost uninterrupted gains, the U.S. housing market is finally pricing in 7% mortgages, and the businesses and investors who adapt their pricing, financing and follow-up to that reality will be best placed when demand returns.

Edited by Coron @QUE.COM
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