The U.S. housing market is showing unmistakable signs of crisis, as falling home prices and rising inventory point to a sustained slowdown. More than a third of the country’s largest housing markets are now seeing year-over-year price declines, according to recent data from Zillow and ResiClub.
110 housing markets report price drops
As of June 2025, home prices have fallen in 110 of the 300 largest metro areas — a dramatic jump from just 31 metros in January. Markets like Austin (-5.8%), Tampa (-5.7%), and Miami (-3.8%) have posted some of the steepest annual declines.
The Zillow Home Value Index shows a national increase of just 0.2% year-over-year in June, down sharply from a 3.2% rise the previous year — a clear sign that price growth has flatlined.
Economists say this shift marks a turning point in the housing cycle, driven by persistently high mortgage rates, increased inventory, and waning buyer confidence.
Zandi sounds ‘red flare’ alarm on housing
Moody’s Analytics chief economist Mark Zandi has upgraded his warning from a “yellow flare” to a full “red flare” on the housing market:
“Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon.”
Zandi added that builders are “giving up”, unable to sustain costly incentives like rate buydowns. Many are postponing land acquisitions, which could lead to a significant drop in future construction activity.
Rising inventory, falling motivation
According to Realtor.com, active listings have surged from 829,000 in January to nearly 1.1 million in June — the highest level since before the pandemic. But while more homes are on the market, buyers remain sidelined due to affordability constraints.
- 1 in 5 homes now offers a price cut.
- Listings are sitting longer on the market.
- Buyer pessimism is growing as economic uncertainty lingers.
“There are two competing forces in the housing market,” said Andy Walden, head of housing research at ICE. “Inventory is rising, which should help affordability, but falling prices and longer time-to-sale discourage homeowners from listing.”
Fed rate policy under pressure
The housing slowdown may soon influence Federal Reserve monetary policy, despite upward inflation pressure from President Trump’s new tariffs.
Comerica Bank economist Bill Adams said the cooling housing market could slow core service inflation, giving the Fed cover to cut rates later this year.
“Housing weakened in the second quarter, with sluggish construction and sales and falling price indexes,” Adams wrote. “If this trend continues, it may outweigh tariff-related inflation.”
President Trump has urged Fed Chair Jerome Powell to lower rates, calling current policy “choking out the housing market.” Trump’s administration has floated structural reforms at the Fed amid growing political pressure.
What it means for homeowners and buyers
For existing homeowners, declining home values threaten equity — especially those who bought near the market peak. Many are now reluctant to sell, leading to a stalemate in inventory turnover.
For would-be buyers, the combination of high mortgage rates and economic anxiety is delaying purchases. Even as inventory rises, affordability remains out of reach for many, particularly first-time buyers.
If mortgage rates don’t come down soon, experts warn the housing market could become a major drag on the U.S. economy by late 2025.