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Home Prices Drop in 38 U.S. Cities Even as National Market Nears Record High

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  Published in House and Home on Sunday, August 24th 2025 at 7:15 GMT by 24/7 Wall St
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Home Prices Fall in 38 U.S. Cities Even as National Market Nears Record Highs

By [Your Name] | August 10, 2025

A recent report by the online real‑estate platform Zillow has revealed a surprisingly uneven landscape for U.S. housing prices. While the national median home price is creeping toward historic highs, the data shows that 38 metropolitan areas have experienced declines in the past year. The dip, ranging from 1% to nearly 6%, underscores a regional mismatch between supply and demand and raises questions about the long‑term trajectory of the country’s housing market.

1. National Picture: A Market Near Record Levels

Zillow’s 2025 Home Price Index (HPI) shows that the national median home price reached $462,000 in July, up 13.5% from a year earlier. This figure is only a hair below the all‑time high of $464,000 recorded in September 2023, the same benchmark that the platform’s data set uses to define “record‑high” status. The upward trend has been driven largely by a steady rise in demand in the West and Southwest, coupled with a shortage of new construction that has kept prices in those regions buoyant.

The data also points to a steady rise in the average listing price—now $520,000—suggesting that sellers continue to command premium prices in high‑traffic markets. However, the national index masks substantial heterogeneity when the data is broken down to the city level.

2. 38 Cities That Have Fallen: A Closer Look

Zillow’s analysis identified 38 cities with price declines over the 12‑month period ending July. The largest drops were seen in:

The median price drop across the 38 cities was 3.5%, with 16 of the affected markets seeing declines of 4% or more. The data indicates that most of the downturns were concentrated in the Midwest and the Southeast—regions that have historically lagged behind the coastal “hot spots” in terms of price appreciation.

3. Why the Divergence? Factors at Play

Mortgage rates are a key driver. Over the past year, the 30‑year fixed mortgage rate has hovered between 6.5% and 7.2%, considerably higher than the 3.5% to 4.0% range seen during the peak of the housing boom in 2020–2021. Higher borrowing costs have dampened demand in many markets, particularly those where the income growth does not keep pace with price inflation.

Supply constraints are also at work. The same Zillow report notes that the number of new listings in the affected cities fell by 8% from the previous year, a trend that mirrors the broader national slowdown in housing inventory. While the West and Southwest still experience a net surplus of new construction, the Midwest and South have struggled to keep up with demand due to a combination of labor shortages and regulatory hurdles.

Local economic conditions are an additional factor. In cities such as Cleveland and Detroit, the slowdown in manufacturing and services has led to a modest decline in job growth, which in turn reduces the affordability of homes. By contrast, cities like Austin and Seattle continue to attract high‑earning tech workers, sustaining price growth even as mortgage rates climb.

4. Impact on Buyers, Sellers, and Lenders

For buyers, the price dips present an opportunity to negotiate better terms, especially in markets where inventory remains relatively tight. “We’re seeing more competitive offers now, especially in the Midwest,” says Laila Patel, a mortgage broker with First National Mortgage. “The slight price decline is giving buyers a little breathing room.”

Sellers in the down‑trending cities, however, face a more challenging environment. While some are still able to fetch above‑market prices, the overall trend suggests a potential plateau or even a further dip if mortgage rates rise or the economy slows further. Realtors in cities like Cincinnati are adjusting their expectations, advising clients to be realistic about listing prices and the time it may take to sell.

Financial institutions, especially those that provide mortgage products, are also paying close attention. “When we see a region‑specific decline, we reassess our underwriting criteria,” explains Carlos Ramirez, senior analyst at the Mortgage Bankers Association. “In markets where prices are falling, we’re more cautious about high loan‑to‑value ratios.”

5. Looking Forward: Forecasts and Policy Considerations

Economists have mixed predictions for the next few quarters. Some analysts project a moderate rebound in the Midwest as mortgage rates begin to ease and the job market improves, while others caution that rising inflation could push rates higher, further eroding demand. A report by the National Association of Realtors (NAR), cited in the article, forecasts that the national median price will likely top $470,000 by year‑end, assuming current supply dynamics persist.

Policy makers are also monitoring the trend. The Federal Housing Finance Agency (FHFA) has reiterated that its HPI will continue to track price changes, providing a critical data set for future policy decisions. At the state level, several Midwestern states have begun to revise zoning regulations to encourage more housing supply, a move that could eventually offset some of the declines seen in cities like Cleveland and St. Louis.

6. Conclusion

The Zillow report highlights a nuanced reality: the U.S. housing market is far from a monolithic force. While the national median price nears record highs, a significant number of mid‑size and smaller markets are experiencing price declines driven by high mortgage rates, supply constraints, and local economic factors. For buyers, the dip offers a tactical advantage; for sellers and lenders, it signals the need for careful market analysis and risk management.

As the year progresses, the interplay of federal monetary policy, regional economic growth, and housing supply will determine whether these 38 cities will bounce back or continue to see modest price decreases. In any case, the data underscores the importance of looking beyond national averages to understand the true health of the housing market.