Skyrocketing home inventories and deep price reductions in southern and western U.S. urban areas as sellers increasingly frantic to dispose of homes quickly
U.S. Housing Market Slows Down, Particularly in South and West
The U.S. housing market is experiencing a cooling trend, with one-third of the market seeing prices drop, according to Realtor.com. This shift is most pronounced in the South and West, where rising mortgage rates, increasing inventory, and affordability challenges are causing more frequent price reductions and extended time on the market.
Regional Differences in Housing Market Performance
The housing market in the Northeast and Midwest remains steadier compared to the South and West. Markets in these regions are showing relatively stronger performance due to better affordability ratios, less overvaluation, and, in some cases, rising infrastructure investment that supports housing demand.
On the other hand, coastal markets with historic overvaluation are grappling with stagnation, but the South and West are distinct in facing notable price corrections linked to affordability and mortgage rate sensitivity.
Key Factors Affecting the Housing Market
- Higher mortgage rates have reduced affordability more sharply in Southern and Western metros dependent on robust demand, leading to increased seller price cuts and slower sales.
- Rising inventory levels have expanded supply, giving buyers greater leverage and making the housing market more competitive, especially in these regions.
- Affordability constraints are more acute in these fast-growing Sun Belt and Western markets due to earlier rapid price increases, triggering corrections.
- Market cycle timing and regional economic factors cause divergence even within the South and West, with some cities stabilizing or positioned for recovery, but overall a more significant near-term slowdown.
Metro Areas Seeing Price Cuts
Among the metro areas, Austin has the most significant price cuts, with a median home price of $510,950 in July, down nearly 5 percent from 2024. Miami is listed second, with a median home price of $509,950 in July, down 4.7 percent since 2024. Denver was fifth on the list, where a median home in July 2025 was $600,000, down 4 percent from the same time last year. Los Angeles is fourth, with an average home price of $1,148,483 in July 2025, down 4.2 percent from July last year.
Chicago is third, with an average home price of $377,000 in July, down 4.4 percent since the same month last year. Nashville is also experiencing list prices starting to soften.
Nationwide Trends
Nationally, active home listings rose for the 21st straight month, and properties took seven days longer to sell than last year. Home sales across the U.S. have plummeted to the lowest level in 16 years, according to property data company CoreLogic. De-listings are continuing, with sellers who cannot find buyers at their desired price pulling listings from the market.
In June, de-listings rose 48 percent year-over-year. Some regions in the U.S. housing market, particularly the South and West, are experiencing a more significant slowdown in 2025. This turbulent housing market in Florida is described as the 'epicenter of housing market weakness' in the U.S.
Danielle Hale, chief economist at Realtor.com, stated that the U.S. housing market has cooled modestly in 2025, but the extent and persistence of rebalancing vary across the country. Despite the challenges in some regions, the housing market still offers long-term value backed by strong job growth and policy support.
This divergence reflects a broader national trend where some undervalued markets in the Midwest and parts of the South are poised for growth, while popular Southern and Western metros recalibrate prices as buyers adjust to stricter financial conditions and expanding supply.
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