In May, median list prices dropped 2.4% year over year, marking the steepest decline in Realtor.com® data since 2017. This occurred as pending sales rose for a sixth straight month, with pending listings up 4.3% year over year and contract signings up 2.6% year over year.
This presents a critical disconnect: median list prices are falling, but pending sales and contract signings are simultaneously rising. More homes are going under contract, yet these transactions happen at significantly lower price points than sellers initially sought.
The current real estate market appears to be in a complex rebalancing. Affordability challenges meet persistent demand, suggesting a nuanced environment rather than a clear shift to a dominant buyer's or seller's market.
What Are Seller's and Buyer's Markets?
Understanding fundamental real estate market characteristics is crucial for navigating current conditions. In a seller's market, prices are higher due to increased demand, homes sell quickly, and multiple offers are common, according to RBC Royal Bank. This environment favors sellers, giving them greater negotiation leverage.
Conversely, a buyer's market features lower prices, increased supply, and homes that sit unsold. This allows buyers more choices and negotiation power, RBC Royal Bank states. These dynamics, driven by supply and demand, differentiate market conditions and set the stage for understanding current complexities.
Key Differences That Define Each Market
| Characteristic | Seller's Market | Buyer's Market |
|---|---|---|
| Price Trend | Houses often sell for more than asking price | Prices tend to fall |
| Sales Speed | Homes sell quickly; inventory doesn't linger | Homes are more likely to sit unsold for extended periods |
| Negotiation Leverage | Little to no room for price negotiations | Buyers have significant leverage for negotiation |
| Inventory Level | Low supply of available homes | High supply of available homes |
| Time on Market | Days or weeks | Often more than six months |
These behaviors provide concrete evidence for identifying market conditions. For instance, Realtor.com® data shows that in a seller's market, houses sell above asking price and quickly, with minimal negotiation. Conversely, if most houses sit on the market for over six months, it signals a distinct departure from a seller's advantage.
When Sellers Adjust Expectations
Despite rising pending sales, the 2026 real estate market is far from a clear seller's market. The steepest year-over-year price decline since 2017 confirms sellers are increasingly forced to concede on price to close deals. This solidifies growing buyer leverage, even as transaction volumes increase.
The six-month streak of rising pending sales does not signal a market recovery to previous highs. Instead, it reflects a delayed reaction: sellers are adjusting expectations downward. This adjustment makes homes affordable again in a higher interest rate environment, allowing buyers to re-enter the market at discounted prices.
When Buyers Find Opportunities
For buyers, opportunities are emerging, but they demand strategic action, not passive waiting for further broad market declines. Despite rising mortgage rates, the simultaneous drop in median list prices and increase in pending sales confirms buyers are actively re-entering the market—but only at significantly discounted prices. This marks a fundamental shift in pricing power towards those prepared to negotiate.
Savvy buyers who understand these market nuances and are prepared to negotiate are the clear winners. They capitalize on sellers' increased willingness to lower prices, offsetting the impact of sustained higher mortgage rates. Conversely, buyers who delay, expecting further steep price drops without understanding current demand, risk missing these adjusted opportunities.
Current Market Snapshot: Is it a Buyer's or Seller's Market Right Now?
What are the signs of a seller's market?
A seller's market typically features homes selling rapidly, often above asking price, with limited inventory and minimal negotiation. While pending sales are rising, the notable drop in median list prices confirms sellers are making significant concessions to attract buyers. This creates a more complex environment than a straightforward seller's advantage.
What is a balanced real estate market?
A balanced real estate market exists when supply and demand are roughly equal, giving neither buyers nor sellers a distinct advantage. Homes sell at reasonable prices within a moderate timeframe, typically four to six months of inventory. The current market, with falling prices but rising sales, reveals an imbalance where price adjustments, not true equilibrium, drive activity.
Which market is better for buying a house?
A buyer's market is generally superior for purchasing a house, offering lower prices, more inventory, and greater negotiation power. However, the current market, while not a full buyer's market, presents unique advantages for informed buyers. Mortgage rates climbed from 6.30% to 6.53% throughout May, but the median list price of $429,500 in May 2026, as reported by Realtor.com®, proves price reductions are making homes more accessible despite higher financing costs.
The Bottom Line for Buyers and Sellers
The market's current dynamic—median list prices falling at their steepest rate since 2017 even as pending sales rise—confirms sellers are increasingly capitulating on price to secure transactions. This fundamentally redefines 'market activity,' moving beyond simple volume metrics.
Companies relying on traditional indicators like rising sales volume to gauge market health miss the critical context: buyers re-enter only when prices significantly offset the burden of sustained higher mortgage rates. Evidenced by climbing rates alongside falling prices, this trend will likely continue shaping transaction patterns through the rest of 2026, according to Realtor.com® analysis.
