The share of homes sold above asking price in the United States hit a two-year low in December, according to the real estate site Zillow. Although this share fell each month during the second half of 2018, sales above asking price were slightly more common for the year as a whole than they were in 2017.

Nationwide, a total of 19.4 percent of homes sold in December went for a higher price than the owner originally asked. This was down from 21 percent in November and a May 2018 peak of 24 percent, the most pronounced monthly drop since at least 2012.

However, the share of homes selling above asking price in 2018 climbed to 23.5 percent – up from 22.7 percent in 2017. This marked the fourth consecutive year where the share of homes selling above asking price experienced annual growth, although the pace was slowing.

Aaron Terrazas, senior economist at Zillow, says the trend of higher-than-expected sales prices has been driven by a limited inventory, which drives bidding wars among buyers for available properties. He said more homeowners began listing their properties during the summer, helping to ease this competition.

"The balance of power began to swing marginally back toward buyers—particularly in higher-priced communities—during the second half of the year, an unfamiliar chill after several years of frenzied activity," said Terrazas. "With mortgage rates now back down, early data from the first month of 2019 suggest that it is still premature to call it a buyer's market. But more than any time in recent memory, it is important for sellers to be thoughtful in their listing strategy. Buyers are out there, but they're no longer fighting each other tooth and nail to get in the door."

Zillow looked at 35 major cities in the U.S. and found that the share of homes selling above list price was down from the previous month in 27 markets. Sales above asking price were down from 2017 in 13 cities.

Indianapolis had the largest drop, with its share of homes selling above asking price falling 12.8 percentage points from November to 19.9 percent. However, the share of homes selling for more than asking price climbed on an annual basis in this city, from 31.7 percent in 2017 to 35.3 percent in 2018.

Other cities with a pronounced monthly drop in the share of homes selling for more than asking price were San Francisco (down 5.4 percentage points to 42.6 percent), Detroit (down 5 percentage points to 16.8 percent), Minneapolis-St. Paul (down 3.7 percentage points to 26.3 percent), and Charlotte, N.C. (down 3.7 percentage points to 18.6 percent).

The largest year-over-year drop in higher-than-expected asking prices occurred in Seattle, where the share fell 6 percentage points to 42.7 percent in 2018. The share dropped 5 percentage points to 31.7 percent in Portland, Ore., and 4.3 percentage points to 33.2 percent in Sacramento, Calif.

Bucking the trend, Washington, D.C. experienced a month-over-month increase in sales above asking price of 1.8 percentage points, with the share rising to 24.7 percent. The strongest annual gain occurred in St. Louis, Mo., where sales above asking price rose 5.6 percentage points from 2017 to 25.3 percent.

Silicon Valley markets remained hot, with close to two-thirds of home sales in San Jose—64.1 percent—selling for more than the owner's asking price in 2018. Homes selling for more than expected raked in a median of $101,000 more than the asking price in this city, breaking the previous record of $70,000 set in San Jose in 2017.

A total of 61.6 percent of homes in San Francisco and 42.7 percent of homes in Seattle sold for more than the list price. Florida markets were cooler, with just 9.7 percent of homes in Miami and 14.5 percent of those in Tampa Bay selling for more than the owner asked.

In the United States as a whole, sellers who earned more than the asking price received a median of $6,830 above asking price. This was down from $7,000 in 2017.

Zillow previously determined that more sellers were cutting the price of their property prior to a sale. That analysis found that the price had been dropped on 14.2 percent of listings sold in June 2018, down from 13 percent in January 2018 and 13.4 percent in June 2017. Homeowners who sold in June had reduced their asking prices by a median of 2.9 percent.