Why 53% of U.S. Homes Lost Value: Insights on a Normalizing Market

Understanding the Latest Trends in U.S. Home Values

The recent report from Zillow reveals a significant shift in the U.S. housing market, with 53% of homes seeing a decrease in value from their peak during the pandemic. However, experts like Zillow's Senior Economic Researcher Treh Manhertz suggest this change reflects a normalizing market rather than a shocking crash. With the average drawdown increasing from 3.6% in Spring 2022 to 9.7% in Fall 2025, many homeowners may feel uneasy about their property values. Yet, while the percentage of homes losing value has risen, it’s important to note that the current average drawdown is still well below the levels seen during the previous housing crisis in 2012.

This is Not a Housing Crash—It's a Normalization

Manhertz emphasizes that despite the jittery market vibe, very few homeowners are selling at losses. In fact, recent data indicates that only 4.1% of homes have sold for less than their previous sale price, a figure indicative of underlying stability. Homeowners, on average, have enjoyed a substantial 67% increase in home values since their last sale, which may mitigate some of the anxiety associated with the declining Zestimate numbers. As Manhertz succinctly puts it, 'What we’re seeing now is a normalization, not a crash.'

Regional Variations: Hot Markets and Slowdowns

Market behavior varies widely across the nation. While cities like Buffalo, New York, and San Jose, California, are experiencing drastic appreciation—108% and 97% increases respectively—other markets are revealing different stories. Cities such as Austin and Dallas have seen declining values, with home listings below previous sale prices reaching significantly higher percentages than the national rate. This divergence underlines that local conditions are crucial to understanding the broader market shifts.

What Current Homeowners Need to Know

For homeowners grappling with declining home values, it's critical to remember that their investment is more robust than it may initially appear. The median time between purchasing and selling homes has soared to an all-time high of 11 years, indicating a stabilized market where most homeowners are unlikely to face immediate selling without profit. The perceived losses can often be buffered by considerable equity accumulated over the years.

The Impact of Inventory and Demand on Future Prices

The continuing challenges of high mortgage rates and limited inventory, as noted in a CBS News analysis, further complicate the housing landscape. These factors have pushed many potential buyers away from the market, leading to a decrease in home value appreciation. Yet, the long-term demand from a growing millennial demographic continues to impact housing prices. With forecasts hinting at gradual market normalization, waiting it out could serve some buyers well as conditions might shift favorably in the near future.

A Look Ahead: Predictions for 2025 and Beyond

As we look toward 2025, experts have differing opinions on whether home prices will rebound or continue to cool. While some predict drops in certain regions, driven by local economic factors and housing shortages, others point to an enduring demand that could see prices rising again if listed inventory increases significantly. Understanding these nuances is crucial for both buyers and sellers who aim to navigate the forthcoming changes in the market.

Conclusion: Stay Informed and Prepared

In summary, the recent decline in home values across much of the U.S. should be viewed through the lens of market normalization rather than panic. Homeowners are maintaining significant equity, and while the housing market presents challenges, it also showcases opportunities for buyers ready to make informed decisions amid changing conditions. Keeping a close watch on local market developments will be key for anyone eyeing a home purchase in the near future.