Industry experts say the housing market isn’t crashing but it is in a recession, with market conditions changing fast, U.S. home values down by 0.1 percent in July compared to June, and home sellers getting few or no multiple offers.

This is the first monthly dip in home values since 2012, following the sub-prime mortgage crisis and Great Recession, according to real-estate marketplace Zillow. But this time around is very different from 2008, Marketwatch reported.

The overheated housing market of a few months ago, with historically low interest rates and skyrocketing demand, appears to be cooling. Buyers are canceling contracts as interest rates rise from less than 3.3 percent at the beginning of 2022 to 5.72 percent.

“We’re witnessing a housing recession in terms of declining home sales and home building,” said Lawrence Yun, chief economist for the National Association of Realtors, in a recent report.

Economic data is sending mixed signals for the economic outlook, Zillow reported. On the upside, the labor market posted stronger-than-expected job growth and falling unemployment in July. Inflation per the Consumer Price Index decelerated in July, which is expected to influence Federal Reserve policy decisions in the coming months. Mortgage rates for prime borrowers are higher than last year but have recently leveled off. On the downside, real GDP fell by 0.9 percent at an annualized rate in the second quarter – the second consecutive decline in 2022 – as consumer spending and corporate investment contracted.

This doesn’t count as a crash in housing prices because the typical home value is up 44.5 percent from July 2019 before the pandemic. But sellers are seeing fewer offers and have to offer more concessions to entice buyers.

Zillow revised its forecast for the growth in home values from the current rate of 16 percent to 2.4 percent through the end of July 2023. It’s “a significant slowdown in annual home value growth,” Zillow said in a press release.

Home sales decreased 19.3 percent in July compared to July 2021 and are now at their lowest since the start of the covid-19 pandemic, according to real estate brokerage Redfin.

This represents the “biggest annual decline in US home sales in more than a year, a reflection of the continued cooling effects of 5.4 percent-plus mortgage rates and nationwide economic uncertainty.”

Home sales in July dropped 4.1 percent compared to June for the sixth-straight monthly decline. However, home prices are still increasing, rising 7.7 percent in July 2022 compared to July 2021, the slowest pace since June 2020, Redfin reported.

Home sellers have also been lowering their listing prices. More than 15 percent of home sellers dropped their price in July in each of the 97 metropolitan areas Redfin covers. The share of homes with price drops rose in July year on year in all but three metro areas.

Home values rose the most in Miami, Fla., Richmond, Va., and Memphis, Tenn, but monthly growth has slowed in these markets as well, Zillow noted.

Home values fell the most in San Jose and San Francisco, Calif., Phoenix, Ariz., and Austin, Texas.

“Our prices have come off of their irrational highs of the last 18 months. It’s kind of a rebalancing,” said Dave Walsh, vice president and manager of Compass Realty San Jose, in a MarketWatch interview. 

Instead of a home getting multiple offers, it’s getting one or two offers, Walsh said. “From your buyer’s point of view, there’s a much better opportunity for them to get something at a much more affordable price.”