Sale prices for newly built homes fell 1% year over year to a median of $363,900 in the first quarter, the first such drop in seven years, according to a new report from Redfin based on the markets it tracks.

Sales of new homes were down 3.1% year over year in the first quarter, the third consecutive quarter of declines. Supply of new homes was up 4.2% in the first quarter, the fourth consecutive period of increases.

The small declines in new-home sale prices and sales and the rise in supply were expected: Redfin first reported that demand for new homes was cooling in the second half of 2018 as builders started dropping prices and offering incentives to agents and buyers showing interest in new construction, such as free design upgrades.

Connie Durnal, a Redfin agent in Dallas, said builders are now using other methods to lower prices for new homes in her area, such as smaller lot sizes and including fewer upgrades in spec homes (those that are built without a buyer lined up). Lowering prices is part of an effort to sell some of the new-home inventory that's been piling up in Dallas (supply of new homes in the Dallas metro was up 14.7% in the first quarter).

"The market for new homes is shifting. Builders are readjusting their pricing to be more competitive, both in low-end and high-end homes. Some of my clients have been able to buy new homes at prices we never could have negotiated a year ago," Durnal said. "One reason builders are able to offer homes for lower prices is because in some cases, they're building on smaller lots farther away from the city center, like in the northern suburbs. They're also reducing monetary incentives such as design center credits and built-in blinds in favor of offering the home for sale at a lower price. That way, builders end up netting the same amount of money on a sale but home buyers may feel that they're getting a better price."