• More than half of U.S. homes have lost value over the past year according to Zillow
• Western and Southern markets hit hardest as pandemic boomtowns cool rapidly
• Experts stress this represents normalization rather than another housing crisis

SEATTLE, WA (TDR) — A sobering milestone has arrived for American homeowners as new research from Zillow reveals that 53 percent of homes across the country have lost value over the past year, the highest share since the aftermath of the Great Recession in 2012.

Home Values Slide Reflects Cooler Market Conditions

The decline, measured by Zillow’s Zestimate tool as of October 2025, represents a dramatic shift from just one year ago when only 14 percent of homes showed declining values. This marks the first time since the housing crash bottomed out that more than half of American properties have depreciated simultaneously.

Treh Manhertz, senior economic researcher at Zillow, sought to calm nerves among worried homeowners.

“Homeowners may feel rattled when they see their Zestimate drop, and it’s more common in today’s cooler market environment than in recent years. But relatively few are selling at a loss. Home values surged over the past six years, and the vast majority of homeowners still have significant equity. What we’re seeing now is a normalization, not a crash.”

Regional Disparities Drive Home Values Decline

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The downturn has struck unevenly across the country, with Western and Southern markets experiencing the steepest drops. Many of these areas represent former pandemic boomtowns that saw explosive price growth during the real estate frenzy of recent years.

Denver leads all major metropolitan areas with 91 percent of homes declining in value from their peaks. Austin follows closely at 89 percent, with Sacramento at 88 percent and both Phoenix and Dallas registering 87 percent declines. These markets aggressively expanded housing supply in recent years, and that inventory is now meeting weakened demand.

By contrast, the Northeast and Midwest have largely avoided such widespread losses. Markets like Buffalo, San Jose, Providence, Columbus, and San Diego have actually seen substantial gains since homes last sold, with increases ranging from 88 to 108 percent.

Mortgage Rates Keep Buyers Sidelined Despite Home Values Softening

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The cooling market reflects persistent affordability challenges that have frozen housing activity. Mortgage rates remain stubbornly above 6 percent, with the 30-year fixed rate averaging 6.23 percent according to Freddie Mac data. Many potential buyers have remained on the sidelines amid economic uncertainty and an ongoing price standoff with sellers.

The Federal Reserve has signaled a cautious approach to additional rate cuts, meaning mortgage costs are unlikely to drop dramatically anytime soon. Industry forecasters expect rates to hover between 6 and 7 percent throughout the coming year.

This environment has created what economists describe as a lock-in effect, where existing homeowners refuse to sell and sacrifice their ultra-low pandemic-era rates. New listings remain constrained even as demand weakens, creating a peculiar stalemate in the market.

Context Matters for Home Values Assessment

Despite the alarming headline figure, deeper analysis reveals a more nuanced picture. Most homes have declined from their peak valuations, with the average drawdown reaching 9.7 percent. However, this remains far below the 27 percent average drawdown witnessed during the housing crisis in early 2012.

Crucially, only 4.1 percent of homes are currently valued lower than when they last sold. While this figure has risen from 2.4 percent a year ago, it remains below the 11.2 percent of homes in similar positions before the pandemic struck.

Nationwide, the median home value increase since last sale stands at 67 percent, reflecting approximately eight and a half years of ownership at the median. For most homeowners, their largest asset continues building wealth despite short-term fluctuations.

As mortgage rates remain elevated and inventory continues building in overheated markets, will 2026 finally bring the buyer-friendly conditions that millions of Americans have been waiting for?

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