Something unusual has swept across the American housing market in the past year: more than half of U.S. homes have lost value, marking the largest share of declines since the aftermath of the Great Recession. For millions of homeowners, this shift is more than a statistic—it’s a direct hit to their financial security, retirement plans, and future ambitions.
Homeowners Face Shrinking Equity
For most Americans, a home is their biggest asset. When values drop—an average of 9.7% from recent peaks—families feel the impact in postponed vacations, delayed renovations, and growing anxiety about their investment. Yet, the story is more nuanced than a simple downturn. The typical homeowner has held their property for about eight and a half years, during which time their home’s value has climbed a median 67%. This substantial equity cushion means that, despite recent declines, most owners remain well above water. The current market correction is a normalization after years of rapid appreciation, not a repeat of the 2008 crash.
Unlike the crisis years, only 4.1% of homes are now valued below their last sale price, up from 2.4% a year ago but far below the 11.2% rate seen before the pandemic. Similarly, just 3.4% of new listings are priced below what the seller originally paid, about half the rate recorded in 2019. The foundation of the market remains solid, even as prices soften.
Regional Winners and Losers
Not all markets are experiencing the downturn equally. Denver leads the nation, with 91% of homes losing value over the past year. Austin, Sacramento, Phoenix, and Dallas follow closely, each with more than 85% of homes declining. These cities, once magnets for remote workers during the pandemic, are now at the forefront of the retreat. The West and South have absorbed the brunt of the correction, with Sun Belt cities like San Antonio, Jacksonville, Orlando, and Tampa seeing declines in 80% or more of their housing stock.
California’s expensive metros have not escaped the slide. San Francisco, San Diego, and Sacramento all posted year-over-year price drops, with nine state metros recording losses affecting more than 80% of homes. Vallejo and Stockton each saw over 90% of homes fall from peak values. San Francisco now has the highest share of listings priced below their last sale, followed by Austin and San Jose.
Mortgage Rates and Market Stalemate
The primary force behind the slowdown is the cost of borrowing. Mortgage rates have hovered above 6% since September 2022, with the average 30-year fixed rate near 6.7% throughout 2025. This affordability barrier has sidelined many buyers, and industry forecasts suggest little relief ahead.
Meanwhile, most homeowners are locked into lower rates secured during the pandemic. About 82% of mortgage holders pay 6% or less, with millions enjoying rates between 3% and 4%. For these owners, moving would mean trading a manageable payment for one hundreds of dollars higher each month. As a result, many choose to stay put, renovate, or simply wait out the market. Only one in five homeowners now carries a rate above 6%, the highest share in a decade.
This dynamic has led to a standoff between buyers and sellers. Buyers, wary of high prices and rates, are quick to walk away—about 15% of home purchase contracts have fallen through recently, the highest rate in years. Sellers, anchored to pandemic-era expectations and substantial equity, often prefer to withdraw listings rather than accept lower offers. In June 2025 alone, 57,000 contracts were terminated, with most disputes arising from inspection or repair negotiations.
Markets Defying the Downturn
While much of the country is cooling, some regions continue to see gains. Supply-constrained markets in the Northeast and Midwest have bucked the trend, with Buffalo leading at a 108% increase in home value since the last sale. San Jose, Providence, Columbus, and San Diego also posted substantial equity growth. These areas, often overlooked during the pandemic boom, have quietly compounded value while others face volatility.
First-time buyers, however, remain locked out. Price declines of 5% to 10% in some markets have not offset the impact of doubled mortgage rates since 2020. Monthly payments now consume over 30% of income, up from less than 20% before the pandemic. The median age of first-time buyers has climbed to 40, reflecting the growing challenge of entering the market.
Looking Ahead: A Market in Transition
Inventory is rising, up more than 20% year-over-year in many markets, but this has not translated into a surge of sales. Existing home sales have dropped to an annualized rate of around 4 million, among the lowest outside the pandemic shutdown. Florida’s reversal is especially dramatic, with Miami, Orlando, Jacksonville, and Tampa all shifting decisively to buyer’s markets.
Industry experts expect the market to remain flat through the rest of 2025, with national home value growth projected at just 0.9% to 1.2%. Zillow forecasts price declines in over 200 cities, and existing home sales are expected to edge up only slightly from last year’s disappointing figures.
The widespread decline in home values signals a significant shift, but not a crisis. With most homeowners sitting on substantial equity and only a small fraction underwater, the market is stabilizing after an unsustainable surge. The current pullback is restoring balance, setting the stage for a more measured future—one where buyers and sellers alike must adjust to new realities.