U.S. Housing Market Cools as Over Half of Homes Lose Value, Zillow Reports

The U.S. housing market is showing clear signs of cooling. According to newly released data from Zillow, 53% of homes nationwide saw their estimated value decline over the past year as of October 2025 — the highest share of depreciating properties since the tail end of the 2012 housing crash. In simple terms, one out of every two homes in America is now losing value.

Despite easing inflation and rising wages, persistently high interest rates continue to weigh heavily on buyer demand. Zillow notes that the sharpest declines are concentrated in the South and West, where inventory has surged but buyers remain cautious due to economic uncertainty and mortgage rates that remain above 6%. With buyers waiting on the sidelines and sellers resisting price cuts, many markets have entered a stalemate, pushing valuations lower.

Denver, Austin, Sacramento Lead the Declines

Among major U.S. metro areas, Denver tops the list, with 91% of homes declining in value, followed by Austin (89%)and Sacramento (88%). Zillow’s findings align with recent S&P Global data showing that 9 out of the 20 largest U.S. metro areas recorded annual price drops, signaling a broadly regional correction.

California markets are also experiencing notable softening. Cities such as Redding (85.1%), Napa (84.7%), Modesto (84.4%), Merced (82.6%), Yuba City (83.9%), and even tech-hub San Jose (78%) saw the majority of homes lose value. The trend reflects ongoing post-pandemic shifts, including outbound migration and rising inventory.

A Correction, Not a Crash

U.S. home prices have been drifting downward since peaking in July 2022, with Zillow estimating a cumulative decline of roughly 9.7%. While this pullback is larger than pre-pandemic fluctuations, it remains far milder than the 27% crashexperienced during the 2008–2012 financial crisis.

Importantly, falling valuations do not mean most homeowners are underwater. As of September 2025, only 4.1% of homes are currently worth less than their last sale price — higher than last year’s 2.8%, but still below the pre-pandemic norm of 7.9%.

Nationwide, the median gain in home value since the last transaction is still 67%, and some markets continue to post exceptional long-term appreciation. Cities such as Buffalo, Providence, Columbia, San Diego, and San Jose have seen home values multiply over the past decade, leaving most homeowners with substantial equity cushions.

Expert View: “A Return to Normal, Not a Collapse”

Zillow senior economist Treh Manhertz says many homeowners panic when they see their Zestimate drop, but true financial damage remains rare.

“The last six years saw extraordinary price growth. Most homeowners still hold significant equity,” he explained. “What we’re experiencing now is a normalization from extreme highs, not a repeat of the financial crisis.”

Looking Ahead: Modest Growth Expected

Zillow projects that U.S. home prices will edge up about 1.2% over the next year, suggesting a period of stability rather than dramatic swings. While high interest rates and inventory levels will continue to shape the market, analysts see no signs of a widespread crash at this time.