The U.S. housing crisis has fractured the country into two distinct markets, creating a tale of polar opposites for homebuyers depending on where they live. A new market report from Zillow reveals that while home values are falling in half of the nation’s largest cities, a crushing affordability problem means most potential buyers are still locked out.
The report paints a complex picture: buyers are technically gaining more negotiating power, but stubbornly high costs are preventing them from using it. This paradox underscores a deepening phase of the nation’s housing crisis, where even good news for buyers comes with a significant catch.
A Nation Divided: Where Prices Are Rising and Falling
The era of uniform, nationwide price hikes is over. The Zillow report shows a near-perfect split across the 50 largest metropolitan areas.
- Prices are Falling in 25 major metros, primarily in the South and West. Former pandemic hotspots are seeing the biggest corrections, with prices dropping most in Tampa (-6.2%), Austin (-6.0%), and Miami (-4.6%). This relief is largely thanks to a surge in new home construction that has given buyers more options.
- Prices are Rising in the other 25 metros, concentrated in the more affordable Midwest and Northeast. Cities like Cleveland (+4.7%), Hartford (+4.5%), and Detroit (+3.8%) are seeing values climb due to steady demand and a persistent lack of new inventory.
The Affordability Paradox: Power Buyers Can’t Use
On the surface, the market appears to be shifting in buyers’ favor. Sellers are cutting prices at a record rate—27.4% of all listings saw a price drop in July. Furthermore, homes are sitting on the market longer, with the median listing now active for 60 days, the longest for any July in Zillow’s records.
However, this newfound leverage is proving useless for many. The typical monthly mortgage payment remains nearly $1,000 higher than it was before the pandemic.
“A defining trait of this market is that buyers are gaining leverage that most of them can’t use, because cost barriers are too high,” said Kara Ng, a senior economist at Zillow. “Buyers forced to the sidelines means less competition for those who can still afford it.”
Can We Build Our Way Out?
The Zillow report clearly links price relief to supply. The markets seeing the most significant price drops are those where builders have been most active since 2020. This trend demonstrates that increasing the housing supply is a direct path to easing price pressure.
However, the problem is far from solved. The U.S. still faces a massive housing deficit estimated at 4.7 million units. Until that gap is closed, the underlying demand will continue to put a floor under prices, keeping the dream of homeownership out of reach for millions and prolonging the housing crisis.