More than half of American homeowners have seen their property values decline over the past year, marking the most widespread downturn since the country was recovering from the Great Recession.
Regional Divergence Masks National Trend
According to fresh data from property marketplace Zillow, 53 percent of US homes have lost value during the past twelve months. This represents the highest proportion since 2012, when the housing market finally reached its lowest point following the 2008 financial crisis.
While the national market appears relatively stable on paper, this average conceals significant variations between different regions, cities and even individual neighbourhoods. Property values have been declining across much of the Southern and Western United States as increasing numbers of homes come onto the market while potential buyers remain hesitant.
Pandemic Boom Towns Experience Sharpest Corrections
Many prospective purchasers are delaying decisions amid recession concerns, persistently high mortgage rates exceeding 6 percent, and a standoff with sellers reluctant to reduce their asking prices.
The most substantial decreases are occurring in previously red-hot pandemic boom towns. In Denver, 91 percent of homes have fallen from their peak value, while Austin records 89 percent and Sacramento shows 88 percent declines from market highs.
Florida has been particularly affected, with more than 80 percent of properties in Jacksonville, Orlando and Tampa now worth less than they were twelve months ago. Dallas and San Antonio are also witnessing declines exceeding 85 percent from peak values.
Zillow's analysis aligns with a comparable report from S&P Cotality Case-Shiller, which examined America's twenty largest metropolitan areas and found nine had experienced falling house prices.
Equity Cushions Provide Silver Lining
Despite these widespread declines, very few homeowners find themselves in negative equity positions. Nationally, the median gain since a property's last sale remains at 67 percent. In certain markets including Buffalo, San Jose, Providence, Columbus and San Diego, values have actually doubled over time.
Homeowners in these cities typically remain in their properties for longer periods, enabling equity to accumulate rapidly. Overall, remarkably few Americans own homes currently worth less than their purchase price.
Only 4.1 percent of US homes are now valued below their last sale price - a smaller proportion than before the pandemic. Even among newly listed properties, merely 3.4 percent are priced below what the seller originally paid, approximately half the rate observed in 2019.
The markets experiencing the highest proportion of listings priced below previous sale values are those that surged most rapidly during the pandemic, including San Francisco, Austin and San Jose. Conversely, across numerous metropolitan areas in the Northeast, Midwest and Great Lakes region, fewer than 2 percent of sellers are accepting losses.
Expert Perspective: Normalisation Rather Than Crisis
Treh Manhertz, senior economic researcher at Zillow, characterised the current downturn as a 'normalisation, not a crash'.
'Homeowners may feel rattled when they see their Zestimate drop,' Manhertz acknowledged. '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.'
Across the United States, the average decline from peak valuation stands at 9.7 percent - steeper than the minor dip witnessed in 2022 but still far from the 27 percent crash recorded following 2008.
The message for homeowners presents a mixed picture: while values may be receding from their highs, most people retain substantial equity buffers. For prospective buyers, the market remains challenging - prices are softening, but not sufficiently to counteract high mortgage rates or stimulate a significant resurgence in purchasing activity.
