The 5 cities where home prices are dropping fast as the housing freeze causes inventory to pile up

Published in House and Home on Sunday, August 3rd 2025 at 6:27 GMT by Business Insider
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Home prices are falling in some places that saw a boom during the pandemic. These areas are seeing declines as inventory piles up amid a frozen market.

Home Prices Are Dropping in These US Cities as the Housing Market Freeze Thaws — What Buyers Need to Know for 2025

The American housing market has been stuck in a deep freeze for much of the past few years, characterized by stubbornly high home prices, elevated mortgage rates, and a severe shortage of available homes. This "frozen" state has frustrated both buyers and sellers, with many homeowners reluctant to list their properties due to the fear of trading low-rate mortgages for much higher ones. However, cracks are beginning to appear in this icy landscape, particularly in certain cities where home prices are starting to drop. As we look ahead to 2025, experts suggest that a combination of increasing inventory, potential interest rate cuts, and shifting economic conditions could lead to more widespread cooling in housing costs. This shift offers a glimmer of hope for prospective homebuyers who have been sidelined by affordability issues, but it also underscores the uneven nature of the market recovery across different regions.

At the heart of the current market dynamics is the inventory crunch. Nationally, the supply of homes for sale remains far below pre-pandemic levels, largely because millions of homeowners are "locked in" to mortgage rates below 4% from the era of ultra-low interest rates. This has created a vicious cycle: fewer homes on the market drive up prices, which in turn discourages buyers amid rates hovering around 7%. But in some metros, this cycle is breaking. Data from real estate platforms like Redfin and Zillow indicate that inventory is ticking up in select areas, often due to new construction, seller fatigue, or economic slowdowns that prompt more listings. As a result, median home prices in these cities are declining, sometimes by double-digit percentages year-over-year, providing rare opportunities for buyers to negotiate better deals.

One of the most notable examples is Austin, Texas, a city that epitomized the pandemic-era housing boom. During the height of remote work and low rates, Austin saw an influx of tech workers and investors, pushing home prices skyward. The median sale price soared to over $550,000 by mid-2022. But now, with tech layoffs, a surge in new apartment and home builds, and a slowdown in migration, the market is cooling rapidly. Recent reports show Austin's home prices dropping by about 10% compared to last year, with the median now around $490,000. Inventory has ballooned, with homes sitting on the market for an average of 60 days—double the national average. Local real estate agents note that sellers are increasingly willing to cut prices to attract buyers, especially as mortgage rates remain a barrier. For those eyeing Austin in 2025, this could mean more bargaining power, particularly if the Federal Reserve follows through on anticipated rate reductions, potentially bringing 30-year fixed mortgages down to 6% or lower.

Similarly, San Antonio, another Texas hotspot, is experiencing a comparable downturn. The city's affordability once drew families from pricier coastal areas, but overbuilding and economic pressures have led to a glut of options. Home prices here have fallen by roughly 8% year-over-year, with the median dipping below $300,000. This decline is partly fueled by an increase in distressed sales and foreclosures, as some homeowners grapple with higher living costs. Experts predict that if inventory continues to rise—currently up 20% from last year—prices could stabilize or even drop further into 2025, making San Antonio an attractive entry point for first-time buyers.

Florida cities are also feeling the chill, with Miami leading the pack in price corrections. The Magic City's real estate market exploded during the pandemic, driven by wealthy transplants seeking sun and tax advantages. Luxury condos and waterfront properties commanded premiums, but now, with insurance costs skyrocketing due to hurricane risks and a slowdown in international buyers, prices are retreating. Miami's median home price has dropped by about 7%, settling around $550,000, while inventory has surged by 30%. This is compounded by new developments flooding the market, creating competition among sellers. In nearby Tampa and Orlando, similar patterns are emerging: price drops of 5-8% amid rising supply. For buyers, this means potential deals on properties that were once out of reach, though they must contend with Florida's unique challenges like flood insurance and climate-related risks.

Beyond the Sunbelt, other regions are showing signs of softening. In Boise, Idaho, which saw one of the most dramatic price surges during the pandemic (up over 50% in two years), the median price has fallen by 9% to around $450,000. The culprit? A reversal of the migration boom, as remote workers return to urban centers, coupled with increased building permits. Boise's market time has extended to 45 days, giving buyers more leverage. Meanwhile, in Denver, Colorado, prices are down 6%, influenced by tech sector slowdowns and high altitude living costs deterring some buyers. Even in traditionally hot markets like Phoenix, Arizona, a 7% price dip reflects overbuilt suburbs and buyer hesitation amid economic uncertainty.

These localized price drops are not isolated anomalies; they signal broader shifts that could define the 2025 housing landscape. Economists from institutions like Fannie Mae and the National Association of Realtors forecast that national home prices will rise modestly by 2-3% next year, but with significant variation by region. The key driver will be mortgage rates. If the Fed cuts rates as expected—potentially multiple times in response to cooling inflation and a softening job market—borrowing costs could fall, unlocking more sellers and buyers. This "thawing" effect might increase transaction volumes by 10-15%, according to some projections, as locked-in homeowners feel more comfortable listing.

However, challenges persist. Affordability remains a crisis, with the typical home still costing over $400,000 nationally, far outpacing wage growth. In high-demand coastal cities like San Francisco and New York, prices continue to climb due to chronic undersupply, bucking the trend seen in the Sunbelt. Additionally, new construction is ramping up, but it's concentrated in multifamily units rather than single-family homes, which could exacerbate the divide between renters and owners. For buyers, this means focusing on markets with rising inventory and falling prices, such as those in Texas and Florida, while being prepared for competition in still-hot areas.

Experts advise prospective buyers to act strategically. "The market is in flux," notes one real estate analyst. "In cities where prices are dropping, it's a buyer's market for the first time in years. But don't wait too long—rate cuts could reignite demand." Practical tips include getting pre-approved for mortgages, monitoring local inventory trends via apps like Realtor.com, and considering fixer-uppers in cooling markets to maximize value. For sellers in these areas, pricing realistically and offering incentives like rate buydowns could expedite sales.

Looking deeper, demographic and economic factors will shape 2025. Millennials and Gen Z, burdened by student debt and high rents, are increasingly entering the market, but they prioritize affordability over location. Meanwhile, baby boomers downsizing could add to inventory in suburban and Sunbelt areas. Climate migration is another wildcard: as extreme weather events become more frequent, buyers may flock to "climate havens" like the Midwest, potentially cooling overheated Southern markets further.

In summary, while the national housing market remains frozen in many respects, price drops in cities like Austin, San Antonio, Miami, Boise, and Denver are harbingers of change. These declines, driven by increased inventory and economic headwinds, offer relief to buyers who've been priced out. As we approach 2025, the potential for lower rates and more listings could accelerate this thaw, but uneven recovery means savvy navigation is key. For those ready to buy, the window of opportunity in these cooling cities might be widening, signaling the end of the great housing freeze and the start of a more balanced era. (Word count: 1,128)

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