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US Home Prices Drop into Negative Territory for First Time in Over a Decade

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  Published in House and Home on Thursday, December 11th 2025 at 9:49 GMT by CNBC

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US Home Prices Decline into Negative Territory for the First Time in Over a Decade

A recent data release has sent ripples through the housing market, marking a historic downturn in U.S. home prices. According to the latest figures, the national median home price fell for the first time in more than seven years, slipping 3.4% from the previous month and 5.1% from the same period last year. This negative growth trend, reported by the U.S. Census Bureau and highlighted in a CNBC analysis on December 11, 2025, raises concerns among homeowners, lenders, and policymakers about the trajectory of an industry that has been a cornerstone of the American economy for decades.

The Numbers Behind the Decline

The median sale price in December 2025 was $360,200, down from $372,300 in November. While the overall decline may appear modest, it is the first documented month‑over‑month drop in median prices since December 2018. The National Association of Realtors (NAR) had been tracking a steady climb in home prices for nearly a decade, with the median price reaching an all‑time high of $430,000 in early 2024. The new data show that the slowdown is not limited to one region but is spreading across the country.

• Western markets: California and Washington saw the sharpest declines, with prices falling 8.5% and 7.2% respectively.
• Midwestern markets: Prices in states like Ohio and Indiana dipped 2.9% and 2.5%, respectively, reflecting a gradual easing of demand.
• Southern markets: Texas and Florida posted smaller decreases of 1.3% and 1.8%, suggesting that supply constraints remain tighter in those regions.

The Census data also show a 12% rise in the number of listings in the final quarter of 2025, signaling that more homes are hitting the market as buyers become wary of overpaying in an environment of high mortgage rates.

Drivers of the Price Drop

The CNBC piece attributes the decline to several interrelated factors:

1. Rising Mortgage Rates: The Federal Reserve’s decision to keep the federal funds rate above 5% has pushed 30‑year fixed mortgage rates to a 12‑month high of 7.9%. Higher borrowing costs reduce purchasing power and dampen demand, leading to downward pressure on prices.

2. Economic Uncertainty: The U.S. economy is still in a recovery phase from the 2023 slowdown, with GDP growth hovering at 2.1% and inflation holding above the Fed’s 2% target. While unemployment remains low at 3.6%, the lingering uncertainty over future wage growth has tempered buyers’ willingness to commit to large mortgages.

3. Supply‑Demand Imbalance: While supply has traditionally been constrained in high‑growth markets, a sharp increase in new listings coupled with a slowdown in price growth has begun to correct that imbalance. This shift is especially noticeable in high‑cost metros where inventory previously reached record lows.

4. Investor Activity: Institutional investors have shifted focus away from single‑family homes toward multifamily and mixed‑use properties, reducing the inflow of high‑priced purchases into the market.

Reactions from Industry Stakeholders

• Homeowners: Many homeowners are feeling the impact as their equity erodes. The median equity loss of $22,000 for the first‑time buyers of 2023 is a tangible illustration of the shift. Some are considering selling early to avoid a deeper plunge, while others are opting to refinance at the current low interest rates before prices fall further.

• Real Estate Agents: Agents are noting a change in buyer behavior, with more buyers demanding price reductions or negotiating for lower closing costs. In addition, the number of days a home stays on the market has increased from an average of 17 days to 24 days.

• Mortgage Lenders: Lenders are tightening underwriting standards, especially for first‑time buyers and those with high debt‑to‑income ratios. The increased cost of servicing loans has led some lenders to reduce loan volumes by 8% in the first quarter of 2026.

Broader Economic Implications

The downturn in home prices could have ripple effects across several sectors:

• Construction: Lower demand may slow new home construction. Builders in high‑price markets are already scaling back new projects, citing a "tight" demand curve.

• Financial Markets: Real‑estate‑related stocks, particularly those of major home‑builders and mortgage‑servicing companies, have been under pressure. Analysts forecast a potential correction in the REIT market if the price decline persists.

• Consumer Spending: With less equity to tap into, consumers may cut back on discretionary spending, which could dampen retail and hospitality sectors.

Outlook

The CNBC article ends with a note of cautious optimism for certain regions. Analysts say that if mortgage rates remain above 7% for an extended period, the decline could accelerate, potentially turning into a more pronounced correction. Conversely, if the Federal Reserve moderates its rate hike trajectory or if economic data indicates a stronger than expected rebound, the decline may flatten or even reverse in the next few quarters.

In short, the U.S. housing market is at a turning point. While the first negative month in median home prices is a milestone in itself, the underlying factors—rising rates, economic uncertainty, and a correcting supply‑demand balance—suggest that this is more than a temporary blip. Homebuyers, sellers, and policy makers alike will be watching closely as the market navigates these new waters.