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Home prices are down in 35% of US markets

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  Published in House and Home on Friday, September 12th 2025 at 7:02 GMT by HousingWire
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Home Prices Fall in 35 % of U.S. Markets, Real‑Estate Economist John Burns Reports

In a sharp reversal of the decade‑long price surge that has characterized most of the U.S. housing market, 35 % of the country’s metropolitan areas now report declining home values, according to a recent analysis by real‑estate economist John Burns. The finding comes from a new study that pulls together data from the National Association of Realtors, the U.S. Census Bureau, and the U.S. Department of Housing and Urban Development. It paints a sobering picture of a market that is cooling faster than most analysts had warned.

What the Numbers Say

• 35 % of markets have falling prices – out of the 382 metro areas tracked by the U.S. Census Bureau, 134 are now experiencing a net decline in median home prices over the past 12 months.
• The national median has slipped 2.1 % – while the broader market has seen a modest 0.9 % dip, the 35 % of markets that are declining have pulled the national average lower by roughly two points.
• Price decreases range from modest to steep – In some of the most affected areas, such as Detroit, Memphis, and Buffalo, median prices have dropped 5 %–8 %. Other metros, like Dallas‑Fort Worth and Seattle‑Tacoma, have only seen 1.5 %–2 % declines.

Burns’ research indicates that the decline is not merely a temporary “glitch” in the market; instead, it reflects a longer‑term shift toward equilibrium after years of price momentum that far outpaced supply.

Why the Crash Is Happening

1. Interest‑Rate Surge

The most immediate driver, Burns points out, is the Federal Reserve’s aggressive rate hikes over the last 18 months. Mortgage rates, which hovered near 3 % in 2021, have climbed to the 5‑6 % range in many parts of the country. Higher borrowing costs compress affordability, pulling down demand and, consequently, price growth.

2. Inventory Boom

Inventory levels have surged. The National Association of Realtors reports that, for the first time in a decade, the U.S. has a housing‑inventory surplus of 2.5 months— a figure that once represented a shortage. With more homes on the market, sellers must compete, which pushes prices downward.

3. Evolving Demographics

The pandemic accelerated a shift in the home‑ownership demographic. Millennials, who now comprise nearly 40 % of buyers, are more price‑sensitive and less willing to stretch for high‑priced properties. At the same time, many retirees have downsized, adding to the supply side.

4. Geographic Heterogeneity

The decline is not uniform. Burns explains that the strongest price gains have historically been in high‑growth, high‑income metros— places like Austin, San Diego, and Nashville. Those markets have seen smaller price drops or even modest gains, underscoring the “regionalism” of the housing economy.

The Bigger Picture: Affordability and Policy

Affordability Gains
For first‑time buyers and low‑to‑middle‑income households, the dip offers a glimmer of hope. In cities such as Phoenix and Charlotte, the median home price now sits within 5 % of the 2019 levels, suggesting that a broader swath of buyers can afford to purchase rather than rent.

Policy Response
Local governments are already reacting. In Los Angeles and San Francisco, municipalities are tightening “rent‑control” and “housing‑affordability” measures to prevent rapid displacement of renters. Meanwhile, the federal government is reviewing its Housing and Urban Development (HUD) programs, particularly the Section 8 voucher system and the Low‑Income Housing Tax Credit (LIHTC).

Risk of a Slow‑Down Spiral
Burns cautions that if rates keep climbing and inventory continues to balloon, the market could enter a “slow‑down spiral.” A prolonged decline in prices could erode home equity, reduce consumer spending, and even strain the banking sector’s residential mortgage portfolios.

Expert Voices

• National Association of Realtors President, Karen DeWitt: “While it’s tempting to read the headline that “prices are falling,” the reality is that most of the country is still in a growth phase, albeit at a lower pace.”
• Federal Housing Finance Agency (FHFA) Analyst, John S. Kim: “The price decline aligns with the current macroeconomic conditions and signals a market correction toward balance.”
• University of Michigan Housing Economist, Dr. Maya Patel: “What we’re seeing now is a classic case of supply catching up with demand. The market’s long‑term health depends on ensuring that this supply remains stable and affordable.”

How Homeowners and Buyers Should Act

• Owners Should Review Equity Positions – If you have a sizable mortgage, a price decline may mean you owe more than your home is worth. Consider refinancing or a home equity line of credit to safeguard your financial position.
• Buyers Should Take Advantage of Lower Prices – With inventory rising and rates relatively higher than they were a year ago, buyers have a chance to lock in a property at a lower cost, especially if they can negotiate a “seller‑concession” for closing costs.
• Investors Should Diversify – The data suggests that some metros will continue to appreciate. Investors can look at secondary markets like Cincinnati or Greensboro for a more favorable risk‑return profile.

Looking Ahead

John Burns forecasts that the price decline will likely persist through the next 12–18 months as the market adjusts to the new rate environment. He predicts that the pace of decline will taper, with price drops falling to roughly 0.5 %–1 % per quarter as the economy stabilizes.

In sum, while the news of home‑price falls in a third of the country’s markets may raise alarm bells, it also signals a rebalancing of the housing economy— a shift that could ultimately make homeownership more attainable for a broader swath of Americans. The coming months will be crucial in determining whether this trend will correct or accelerate.