Over Half of U.S. Homes Decrease in Value Over Past Year
The U.S. housing market is experiencing significant shifts, with over half of homes losing value in the past year, according to Zillow. This trend marks the highest percentage of depreciating homes since the Great Recession. In October, 53% of U.S. homes registered a decline in their “Zestimates,” a stark increase from only 16% the previous year.
Regional Variations in Home Value Declines
Losses in home values have been most pronounced in the West and South regions. In these areas, almost all homes have experienced depreciation. The cities with the most pronounced declines include:
- Denver: 91%
- Austin: 89%
- Sacramento: 88%
- Phoenix: 87%
- Dallas: 87%
In contrast, the Northeast and Midwest largely avoided such losses, although Zillow reports that declines are now expanding to more homes across these metropolitan areas.
Average Home Value Changes
The average drop in home values has been noted at 9.7%, up from 3.5% reported in spring 2022. However, this figure remains considerably lower than the peak average decline of 27% seen in early 2012. Importantly, these reductions in value are primarily theoretical won’t impact homeowners until they sell their properties at lower prices.
Despite current market conditions, Zillow’s data reveals that homeowners are in a favorable position overall. Since the last sale, median home values have increased by 67%. Furthermore, only 4.1% of homes have depreciated since their last documented sale.
Current Market Conditions
Treh Manhertz, a senior economic researcher at Zillow, commented on the current state of homeowner sentiment. He noted that while many may feel unsettled by lower Zestimates, the majority are not selling at a loss. The recent slowdown in home sales is largely attributed to interest rate hikes from the Federal Reserve in 2022 and 2023, which escalated borrowing costs and discouraged homeowners from selling.
The ongoing shortage of new listings has kept home prices elevated. However, the weak demand has caused a shift in the market dynamics, favoring buyers over sellers. This shift has resulted in increased delisting rates, as frustrated sellers withdraw their properties from the market when faced with offers below asking prices.
Looking Ahead: A Market Turnaround?
The National Association of Realtors (NAR) anticipates a rebound in the housing market. NAR Chief Economist Lawrence Yun recently projected that existing-home sales would increase by 14% in 2026, following three years of stagnation. New-home sales are also expected to rise by 5%, contributing to a 4% increase in home prices.
Yun emphasized that 2024 is poised for a significant recovery in sales, stating that home prices are not at risk of declining. As the market stabilizes, many anticipate a normalization in home values rather than a crash.
