Home Prices Fall in 2025 in 23% of Markets

The U.S. housing market is showing signs of a complex divide in 2025. According to the National Association of REALTORS, home prices declined year over year in about 23 percent of metro markets during the third quarter.  Yet in contrast, many regions, especially in the Northeast and the Midwest, saw strong price growth, highlighting a fragmented national picture. Overall, 176 out of 230 metro areas tracked by NAR reported rising prices, while declines happened in 51 markets. Despite the dip in some areas, the median price for an existing single-family home nationally rose to $426,800, according to NAR. This shift reflects broader trends tied to Home Prices Fall in 2025.

Why Prices Are Dropping in Some Areas

One of the biggest factors contributing to the price drops in 23% of markets is the surge in housing supply, especially in the South and the West. These regions have seen a lot of new construction in recent years, easing inventory constraints that once drove up prices.

In these overheated markets, building activity has outpaced demand, giving buyers more options and reducing upward pricing pressure. That said, the price declines in many of these areas are not seen as a long term collapse. NAR’s Chief Economist, Lawrence Yun, suggests they could represent a “second-chance opportunity” for buyers who were previously shut out.

Northeast and Midwest Still Strengthening

While home prices are cooling in many Southern and Western metros, the Northeast and Midwest continue to show some of the strongest price growth in the nation. Both regions remain highly supply constrained, which is keeping competition elevated and pushing prices higher even as the broader U.S. market becomes more mixed. This is happening even while Home Prices Fall in 2025 in many other parts of the country.

The shortage of for sale homes in these regions is largely driven by slower construction activity, aging housing stock, and long term demand from both local buyers and new residents relocating from higher cost coastal states. As a result, even moderate buyer activity is enough to keep upward pressure on prices.

Key Regional Numbers

Northeast:

The Northeast continues to stand out as one of the strongest housing markets in the country, with the median existing home price rising to about $540,100 and showing roughly 6% year over year growth. This pace of appreciation reflects long standing supply pressure across the region. Many homeowners are holding onto low mortgage rates, which keeps listings tight and prevents the market from resetting to normal inventory levels.

Major metros and nearby suburbs remain especially competitive. Boston and much of eastern Massachusetts continue to attract high earning buyers who compete for limited single family homes. In New York, the suburban counties of Westchester, Nassau, and Suffolk still see more demand than supply, and buyers looking for commuter friendly towns are driving up prices. The Philadelphia region shows similar trends, especially in Montgomery, Bucks, and Chester Counties, where families seek larger homes and stable school districts.

Examples outside the major metros show the same pressure. Coastal areas in Rhode Island, Connecticut shoreline communities, and fast growing parts of New Jersey like Bergen and Monmouth Counties, all experience steady demand even when rates rise. Inventory simply has not kept pace with the number of active buyers in these markets.

Another factor shaping the Northeast is the age and style of the housing stock. Much of the region consists of older homes that limit the pace of new construction. This keeps supply from growing in any meaningful way. At the same time, job stability in education, health care, technology, and government supports ongoing buyer confidence. These conditions create a consistent imbalance where demand remains strong while choices remain limited.

For buyers, this results in quicker sales, more competitive offers, and very little negotiation room in the most desirable areas. For sellers, it continues to be a favorable environment, especially for homes located near transit, job centers, and established neighborhoods with strong school systems. The Northeast is expected to remain one of the most supply constrained regions in the country through next year.

Midwest:

Median prices increased to $331,100, a 4.2% annual jump. The Midwest remains one of the most affordable regions in the U.S., and that affordability, combined with steady job growth in cities like Minneapolis, Indianapolis, Columbus, and Kansas City, is helping maintain strong buyer interest.

Why These Regions Are Still Growing

These continued gains highlight how structural inventory shortages and stable regional demand are sustaining appreciation even when national price momentum is less consistent. While other parts of the country are seeing prices level off due to higher supply, the Northeast and Midwest are experiencing the opposite:

• Fewer listings
• Limited new construction
• Persistent demand from both in-state and out-of-state buyers
• Stronger local economic fundamentals

Overall, these regions are showing that a tight housing supply can keep prices rising even in a softening national environment.

What the National Median Price Means

The national median existing home price of $426,800 shows that, on balance, Home Prices Fall in 2025 in some areas, but home values are still rising. But this headline number hides a lot of local variability. In some metros, buyers are seeing price cuts, while in others, the cost of homeownership keeps climbing.

NAR’s report underscores this split: 77% of metros saw price increases, while 23% saw declines. The weakness in some markets may be more about buyer fatigue, shifting inventory, and regional construction than a broad housing crash.

Affordability and Mortgage Payments

For many Americans, monthly mortgage payments are a major hurdle, but there’s some mixed news in 2025. According to NAR’s data:

• The typical monthly mortgage payment for a single-family home (assuming a 20% down payment) was $2,187.
• That payment is down 2.8% from the previous quarter, even while average family incomes have risen.
• For first-time buyers, the typical loan payment (on a starter home valued around $362,800 with a 10% down payment) was about $2,146.
• First-time buyers are spending 37.4% of their income on that payment, a slight dip from 38.1% a year earlier.

These numbers suggest that, for some buyers, affordability may actually be improving slightly, though this depends heavily on local market conditions.

Why the South and West Are Feeling Pressure

In many Southern and Western markets, new construction has ramped up significantly in recent years. What was once a supply constrained environment is becoming more balanced, with more homes available and builders offering incentives.

Lawrence Yun of NAR believes that this trend may be temporary and could offer a window for buyers who were previously priced out. For those considering entering the market in these regions, falling home prices might be a chance to find bargain properties, though it’s still important to look at local factors like job growth, mortgage rates, and long term demand.

The Role of Housing Wealth

Even with price softening in some places, Home Prices Fall in 2025, but homeownership continues to build wealth for many Americans. Yun noted that while home sales have struggled, home prices continue to climb in most markets, contributing to “record-high housing wealth.”

For existing homeowners in Northeast and Midwest markets, those gains are especially meaningful. As prices increase, so does the value of their homes, giving them more equity and financial security even if selling conditions become more mixed.

What This Means for Buyers and Sellers

Buyers

• In markets with declining prices (mainly in the South and West), buyers may find more negotiating power and potential deals.
• But in tight, appreciating markets like the Northeast and Midwest, buyers should act quickly; inventory is still limited and demand is strong.
• First time buyers should carefully weigh mortgage payment burdens against their income, especially in markets where affordability is improving only marginally.

Sellers

• In cooling markets, some sellers may need to adjust price expectations or offer incentives to attract buyers.
• In appreciating markets, sellers may still command strong prices, especially in areas with low inventory.
• Long-term investors should consider how regional trends affect rental demand and future resale potential.

Regional Highlights 

• Northeast: Top gains of ~6.0% in median existing-home prices. Tight inventory and strong demand continue to fuel growth.
• Midwest: Raised median price by 4.2% year-over-year. More affordable region still seeing robust appreciation.
• South: Modest increase (~0.5%) despite widespread new construction; some markets are seeing price declines.
• West: Slight drop in median price (~0.1%), showing signs of inventory outpacing demand in some metro areas.

Risks to Watch Going Forward

1. Inventory Surge: If construction continues strongly in the South and West, more markets could join the 23% already seeing price declines.
2. Mortgage Rate Fluctuations: Lower rates could reignite demand, while higher rates might suppress affordability and cool the market further.
3. Regional Economic Divergence: Job growth and population trends vary widely across the U.S.; markets with strong economic fundamentals (Northeast, Midwest) may continue to outperform.
4. Affordability Challenges: For first-time buyers, mortgage payments still account for a large portion of income. Rising payments or stagnant income could limit demand.
5. Policy Risk: Changes in housing policy, zoning, or tax incentives could reshape supply and demand dynamics in local markets.

Why 23% of Markets Are Declining Matters

That 23% of markets showing declining home prices is not a small figure; it highlights how uneven the U.S. housing recovery is in 2025. While some areas remain strong, others are rebalancing. For buyers, this could be the year to find value, particularly in Southern and Western metros. For sellers, it may be a signal to adjust strategies or refocus on regions with more stability.

But the key takeaway is that not all markets are created equal. National trends don’t tell the whole story; understanding regional dynamics is more critical than ever for anyone looking to buy or sell a home this year.

FAQs

1. Why are home prices falling in some markets but rising in others?

Price declines are mainly happening in the South and West, where construction has brought in more supply. Meanwhile, the Northeast and Midwest remain tight, with limited inventory and strong demand driving up prices.

2. What is the national median home price right now?

According to NAR, the national median existing home price in Q3 2025 was $426,800, reflecting modest year over year growth.

3. How many markets saw falling home prices?

About 23 percent of the 230 metro markets tracked in the NAR report saw annual home price declines in Q3 2025.

4. What is the typical mortgage payment for 2025?

The typical monthly payment on a home, assuming a 20% down payment, was $2,187. For a starter home (with a 10% down payment), first-time buyers are paying around $2,146/month.

5. Is this downturn a long-term trend or a short-term opportunity?

Experts suggest many of the declines may be temporary, tied to new construction and region specific conditions. For some buyers, especially in the South and West, this may be a second chance moment, but long-term fundamentals still favor regions with tighter supply.

Conclusion

The latest NAR data shows a clear split in America’s housing market: while Home Prices Fall in 2025 in 23% of markets, a strong majority still see gains. The Northeast and Midwest continue to lead in appreciation, while the South and West are cooling. This division underscores how local conditions, not just national trends, should drive any housing decision in 2025.

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