Nearly One Third of Major US Housing Markets Now See Price Plunge

July 14, 2025 — The U.S. housing market is undergoing a significant shift, with nearly one-third of the nation’s 100 largest metropolitan areas reporting annual home price declines of at least 1%, according to a recent analysis by mortgage technology firm ICE.

This cooling trend, driven by high mortgage rates, increasing housing inventory, and softening demand, marks a stark contrast to the post-pandemic real estate surge that saw prices soar to record highs.

As the market rebalances, both buyers and sellers face new challenges and opportunities in navigating this evolving landscape.

Data from ICE indicates that home price growth in June 2025 slowed to just 1.3% year-over-year, down from 1.6% in May, representing the weakest pace since June 2023.

This deceleration is particularly pronounced in certain regions, with markets like Jacksonville, Florida (-15.1%), Miami, Florida (-13.7%), and Virginia Beach, Virginia (-14.2%) experiencing some of the steepest declines.

These areas, which saw explosive price growth during the pandemic, are now softening due to factors such as reverse migration, economic uncertainty, and increased housing supply.

Nationally, home prices remain 39% higher than in March 2019, before the pandemic-driven boom, according to the S&P CoreLogic Case-Shiller Index.

However, the combination of high mortgage rates and growing inventory is curbing further price appreciation.

The average rate on a 30-year fixed mortgage has hovered in the high 6% range for most of 2025, roughly double the rates seen during the early pandemic years when prices surged.

This has significantly reduced affordability, with 70% of U.S. households—approximately 94 million—unable to afford a $400,000 home, and the median new home price estimated at $460,000.

Rising Inventory Offers More Choices but Challenges Persist

A key driver of the cooling market is a significant increase in housing inventory, which rose 29% in June 2025 compared to the previous year.

Despite this uptick, inventory remains below pre-pandemic levels, and the new supply is often not at the price points most in demand—particularly the lower and middle tiers.

This mismatch continues to exacerbate affordability challenges, especially for first-time buyers, who made up only 30% of home sales in May 2025, compared to a historical average of 40%.

“There are two competing forces in the housing market right now,” said Andy Walden, head of mortgage and housing market research at ICE.

“Increasing inventory levels are helping to make homes more affordable, but prices are falling in an increasing number of markets, and homes are taking longer to sell, which could make homeowners reluctant to list.”

This reluctance is partly due to the “seller lock-in effect,” where homeowners with low mortgage rates from the pandemic era hesitate to sell and lose favorable financing.

While this effect eased slightly in 2024 due to life events and the need to tap home equity, it continues to limit supply in some markets.

The cooling trend is not uniform across the U.S. While southern markets like Florida and Texas are seeing significant price corrections, other regions, particularly the Midwest and parts of New England, are poised for growth.

The National Association of Realtors (NAR) predicts that cities like San Antonio, Texas, and Hartford, Connecticut, will become “housing hot spots” in 2025, driven by robust job growth, relatively affordable inventory, and mortgage rates slightly below the national average.

For example, San Antonio saw 10.7% job growth between 2019 and 2024, with 2023 mortgage rates at 6.4%, compared to the national average of 7%.

Conversely, markets like Tampa, Florida (-2.2%), and Dallas, Texas (-0.2%), have turned negative, while San Francisco’s prices are nearly flat.

These areas, which experienced rapid appreciation during the pandemic, are now adjusting as demand wanes and supply grows.

High mortgage rates, which peaked near 8% in October 2023 and have since stabilized around 6.63% as of early April 2025, remain a significant barrier to affordability.

The Federal Reserve’s cautious approach to rate cuts, driven by concerns over potential inflationary pressures from tariffs and other economic policies, suggests that borrowing costs may remain elevated through 2025.

Additionally, proposed tariffs on goods from China, Canada, and Mexico could further impact the housing market by increasing construction costs.

The National Association of Home Builders estimates that these tariffs could add $7,500 to $10,000 to the cost of building a home, with lumber costs alone rising by approximately $4,900 per home.

This could further strain affordability and slow new home construction, particularly in markets already grappling with high costs.

Climate Risks Add Another Layer of Complexity

Beyond economic factors, climate risks are increasingly influencing home values.

A report by First Street estimates that by 2055, 84% of U.S. homes could see some decline in value due to climate-related risks, totaling $1.47 trillion in losses.

Areas like parts of Texas, Florida, and Louisiana are particularly vulnerable, with some counties potentially facing home value reductions of up to 50%.

Rising insurance costs, expected to increase by 25% over the next 30 years, further erode affordability as the cost of homeownership rises.

Looking ahead, experts predict a mixed outlook for 2025.

The NAR forecasts 4.5 million existing home sales with a median price of $410,700, though prices in many affordable markets remain below this threshold.

Home price growth is expected to moderate, with forecasts ranging from 1.3% to 3.5% annually, a significant slowdown from the rapid increases of recent years.

While the increase in inventory and softening prices may offer opportunities for buyers, particularly in markets undergoing corrections, affordability challenges persist.

“The housing market is rebalancing, offering more choices for shoppers,” said Danielle Hale, chief economist for Realtor.com.

“However, high costs and economic uncertainty suggest a sluggish response from buyers in the near term.”

For sellers, the longer time on the market—over half of homes for sale in November 2024 sat for at least 60 days without a contract—may require more competitive pricing or concessions to attract buyers.

Meanwhile, renters, facing flat rental prices in 2025, may find more negotiating power with landlords offering concessions like free rent or waived fees.

The U.S. housing market in 2025 is at a crossroads, with falling prices in nearly one-third of major metro areas signaling a shift from the frenzied growth of the pandemic era.

While rising inventory provides more options for buyers, high mortgage rates, economic uncertainties, and emerging climate risks continue to challenge affordability and market stability.

As the market evolves, both buyers and sellers will need to adapt to these changing dynamics, with regional variations and policy impacts shaping the path forward.

Also Read: S&P Report: The US Dollar Is Primed To Weaken Further

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