The U.S. housing market is caught between high borrowing costs, expensive homes, and hesitant buyers. National home sales have fallen below levels seen at the depths of the 2008 financial crisis. Yet real estate remains local. Austin, Phoenix, Denver, and Dallas show how quickly conditions can change when buyers gain leverage.
I am Taylor Sohns, CEO of LifeGoal Wealth Advisors, a Certified Investment Management Analyst, and a Certified Financial Planner. As a financial advisor overseeing more than $500 million, I watch housing data for signs of changing household finances and consumer demand.
A Housing Market in an Arctic Freeze
Home sales have slowed to unusually low levels. High prices have shut out some buyers, while elevated mortgage rates have reduced how much others can afford.
This combination has created what I call an Arctic freeze in housing. Many prospective buyers cannot justify current monthly payments. Many owners don’t want to give up the low mortgage rates they secured before rates rose.
The result is a market where both sides hesitate. Buyers wait for lower prices or borrowing costs. Sellers resist lowering their asking prices, especially if they don’t need to move.
“It’s a buyer’s strike.”
This phrase describes an affordability-driven withdrawal from the market. It does not mean every buyer has disappeared. It means many households refuse, or are unable, to buy at the prices sellers expect.
View this post on Instagram
Mortgage Applications Point to Weak Future Demand
Closed home sales tell us what recently happened. Mortgage applications can offer a view of likely future purchases because most buyers apply before completing a transaction.
Purchase mortgage applications have also fallen below 2008 levels. That suggests weak sales activity may continue unless affordability improves or buyer demand returns.
Several changes could improve affordability:
- Mortgage rates could decline, lowering monthly loan payments.
- Home prices could fall enough to match local incomes.
- Household earnings could rise faster than housing costs.
- Sellers could offer concessions, repairs, or help with closing costs.
A lower mortgage rate can help, but it may also bring sidelined buyers back into the market. If demand rebounds faster than supply grows, prices may receive fresh support.
Price reductions can have a more direct effect. A lower purchase price reduces the required down payment and the amount borrowed. It may also reduce property taxes in places where assessments reflect market value.
Housing Supply Has Recovered
A common explanation for expensive housing is that too few homes are available. That was a major issue after the pandemic began, when listings dropped, and buyers competed for limited inventory.
National supply has since returned to roughly pre-pandemic levels. That doesn’t mean every city, neighborhood, or price range has enough homes. It does weaken the idea that limited supply alone explains current prices.
The larger issue may be the gap between asking prices and what buyers can afford. Some sellers still base their expectations on the rapid gains recorded when mortgage rates were low, and demand was intense.
“Sellers just have fairy-tale prices.”
That description points to a mismatch rather than a judgment about every listing. A home can attract little interest when its price reflects an earlier market. The property may be desirable, but the payment no longer fits buyers’ budgets.
Sellers can respond by lowering the price. They may also offer credits, pay certain closing costs, or agree to a temporary mortgage-rate buydown. These concessions can reduce the buyer’s near-term expense without changing the advertised price as much.
The Four Markets Showing Major Price Declines
The clearest price weakness has appeared in parts of the South and West. Several cities that posted strong gains during the pandemic have since fallen significantly from their peaks.
- Austin, Texas: Home prices are down 27% from their peak four years ago.
- Phoenix, Arizona: Prices are down 11% from the market peak.
- Denver, Colorado: Prices have declined 9% from their peak.
- Dallas, Texas: As a bonus market, Dallas is down 7.5% from its peak.
Austin stands apart because its decline is much larger. A 27% drop from the peak represents a major reset, especially for owners who purchased near the top with a small down payment.
For example, a hypothetical home valued at $500,000 at the peak would be worth $365,000 after a 27% decline. That is a paper loss of $135,000 before selling costs.
The same example produces smaller, but still meaningful, changes elsewhere. An 11% decline would reduce the value to $445,000. A 9% decline would bring it to $455,000. A 7.5% decline would reduce it to $462,500.
These examples are simple illustrations. Actual results depend on the neighborhood, property type, condition, and original purchase price. Citywide averages do not determine the value of a specific home.
Why Parts of the South and West Are Softer
Austin, Phoenix, Denver, and Dallas attracted buyers during the pandemic. Remote work, migration, low mortgage rates, and demand for more space supported rapid price increases in many Sun Belt and Western markets.
Those conditions did not last. Mortgage rates rose, affordability weakened, and pandemic-era migration patterns changed. Builders also added homes in many Southern and Western areas, giving buyers more choices.
Markets with more new construction can adjust differently from places where building is restricted. A homebuilder may reduce prices or offer incentives to complete a sale. Existing homeowners then compete with those offers.
Local employment also matters. A market tied closely to technology, finance, energy, or another major industry may react when hiring slows. Population growth, insurance costs, property taxes, and investor activity can also influence demand.
These factors help explain why national averages provide only part of the story. One city may have rising inventory and frequent price cuts. Another may still have several buyers competing for a limited number of homes.
What Buyer Leverage Looks Like
Buyers have more leverage when homes remain listed longer, inventory rises, and sellers reduce prices. A buyer may then have room to request repairs or negotiate other terms.
Useful signs of buyer leverage include:
- Repeated reductions to the listing price
- Longer average time on the market
- More listings than completed sales
- Seller-paid closing costs or mortgage incentives
- Fewer offers on each available property
A softer market does not remove financial risk. Buyers should still avoid treating a price decline as proof that a home is inexpensive. The monthly payment may remain high because of mortgage rates, taxes, insurance, and maintenance.
I would focus first on the full cost of ownership. A household should have room for repairs and unexpected expenses after paying the mortgage. Buying at a discount offers little protection if the payment strains the monthly budget.
Buyers should also compare existing homes with new construction. Builders may offer lower rates or closing credits that change the true cost. Review those offers carefully because some benefits are temporary.
What Sellers Should Take From the Data
Sellers in weaker markets should study recent closed sales rather than rely on old peaks. A high price from several years ago may have little to do with current demand.
An overpriced home can sit unsold and develop a stigma. Buyers may assume there is a problem with the property, even when the main issue is price. A realistic starting price can attract more interest and reduce carrying costs.
That does not mean every seller must accept a steep discount. Property condition, school district, lot size, and nearby inventory still matter. Some homes will perform better than the citywide average.
Owners who purchased long before the peak may also have substantial equity. They can often negotiate with more flexibility than recent buyers who financed most of the purchase.
Price Declines Need Proper Context
A decline from a peak is not the same as a decline from the original purchase price. A home may fall 10% after rising 30% in prior years and still be worth more than it was before the surge.
Average market figures can also be affected by the types of homes being sold. If more lower-priced properties close during one period, the average may decline even if individual home values change less.
For that reason, buyers and sellers should review several measures. Median prices, price per square foot, inventory, pending sales, concessions, and days on market can provide a clearer local picture.
The central lesson is simple: national weakness does not produce equal results everywhere. The South and West currently include several markets where buyers have gained negotiating strength. Austin shows the sharpest adjustment, followed by Phoenix, Denver, and Dallas.
Base housing decisions on local evidence and personal finances, not a national headline. Buyers may find opportunities in softer cities, but affordability remains the first test. Sellers should use current comparable sales and adjust expectations when demand no longer supports peak-era pricing.
Frequently Asked Questions
Q: Does a national sales slowdown mean every home will lose value?
No. Housing performance varies by city, neighborhood, property type, and price range. Some areas may decline while others remain stable because supply is limited or local demand is stronger.
Q: Is Austin automatically a good market for buyers now?
Not for every buyer. A 27% decline from the peak may create negotiating room, but mortgage rates and ownership costs still matter. Buyers should compare total monthly costs with their income and savings.
Q: How can sellers respond when buyers have more leverage?
Sellers can use recent local sales to set a realistic price. They may also consider repairs, closing-cost credits, or mortgage incentives. The best approach depends on the home and the competition nearby.
Image Credit: Thirdman; Pexels
