But decreased supply from buyers waiting to list should increase prices, not decrease them.

Indeed.

However, I wonder how median price is impacted by a shifting mix of the houses that change hands?

If buyers were moving towards the lower end of the market and away from the upper end, you could see the median price decrease when in fact any given house has actually gone up in price.

Now, at least. If the buyers don't materialize and they give up on waiting, it increases supply and decreases prices.

If they were holding on to supply, it would keep prices high (since the people that did want to buy houses right now would have to pay higher prices to make up for the lost revenue sellers would have gotten post IPO