Housing Market Correction Indicators

1. Days on Market Are Increasing

Homes are now taking longer to sell than at any time since 2017, according to Realtor.com. In July, the median time on market hit 58 days, a notable increase from the hyperactive post-pandemic years.

While not yet definitive, extended time on market—especially in major metros like Los Angeles, Dallas, Phoenix, San Francisco, and Seattle—could foreshadow a correction. Realtor.com economist Joel Berner cautions that if homes start sitting longer than even pre-pandemic norms, it could signal a pricing shift.

Adding to the uncertainty: an uptick in delistings, as sellers retreat in the face of softening demand. This reluctance to negotiate may limit price drops, frustrating bargain-seeking buyers.

2. New Home Construction Pullback

Builders, who typically have strong foresight into housing demand, are pulling back. June saw single-family housing starts fall to their lowest seasonally adjusted pace in a year, and permits for new builds also dropped sharply.

Zillow senior economist Orphe Divounguy explains that builders are reacting to a combination of rising costs and weaker pricing power. While many builders have been offering incentives to attract buyers—like rate buydowns or home upgrades—that trend may not last if construction continues slowing.

This could lead to fewer deals in the new home market and worsen the long-term housing shortage, further complicating affordability.

3. Employment and Inflation Could Drive Rates

July’s weaker-than-expected jobs report and downward revisions from prior months sent shockwaves through the bond market. The result: a drop in the 10-year Treasury yield, pulling mortgage rates down from 6.75% to 6.58%, per Mortgage News Daily.

Since mortgage rates are closely tied to broader economic indicators, the direction of employment and inflation data will be crucial going forward. Strong numbers could push rates up again, while weak reports may keep easing financing costs.

However, minor rate dips haven’t yet unlocked demand. “Small movements have not unleashed the pent-up demand,” says NAR’s Jessica Lautz. But a sustained decline could be the catalyst.

Conclusion

These three housing market correction indicators—days on market, construction trends, and economic data impacting mortgage rates—are forming a complex picture. Whether these signals mark a short-term pause or the beginning of a broader correction remains to be seen. But for both buyers and sellers, staying informed on these metrics is key to navigating what could be a pivotal phase in the U.S. housing cycle.