U.S. Housing Market Outlook: Cities Facing the Steepest Home Price Declines

At a Glance

• • • National Home Prices Declining: Unlike most past recessions, U.S. home prices are projected to fall about 1% nationally, with some local markets facing much steeper drops of 5–15%.

    • Key Drivers of the Decline: Rising insurance premiums, higher mortgage interest rates, growing inventory, and local oversupply are putting downward pressure on housing values.

    • Cities Most at Risk: Smaller cities like Greenville, MS (-16.7%), Clarksdale, MS (-14.8%), and Pecos, TX (-13.7%), along with major metros like New Orleans (-7.2%), San Francisco (-6.1%), and Austin (-5.1%), are forecasted to see the steepest declines.

Home prices don’t usually fall, even during recessions. In fact, in four of the last six recessions, U.S. home values actually went up. The one glaring exception? The Great Recession, which was fueled by a housing collapse. That makes today’s nationwide decline in home prices even more remarkable.

According to Zillow, home prices are projected to drop about 1% nationally over the next year. While that may sound modest, housing market corrections aren’t like stock market corrections. A 5–10% decline in housing values is a big deal, and some areas are set to experience much steeper declines than others.

Why Are Prices Dropping?

Several factors are pressuring home values:

• • Rising insurance premiums: particularly in Gulf Coast and wildfire-prone states.
  • Higher interest rates: pushing monthly payments higher.
  • Increased inventory: homes are sitting longer on the market, reducing competition.
  • Local oversupply: some cities simply built too many new homes in recent years.

Small Cities with the Steepest Projected Declines

According to Zillow’s data, these smaller cities are expected to see the biggest price drops in the next 12 months:

1. 1. Greenville, Mississippi: -16.7%
   2. Clarksdale, Mississippi: -14.8%
   3. Pecos, Texas: -13.7%
   4. Cleveland, Mississippi: -13.6%
   5. Bennettsville, South Carolina: -11.9%

Notably, three of the top five are in Mississippi, where surging Gulf Coast insurance premiums are adding heavy affordability pressures.

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Major Metro Areas at Risk

Since most Americans live in larger cities, here’s where the biggest urban declines are forecasted:

1. New Orleans, Louisiana: -7.2%

Affected by skyrocketing insurance costs, weaker tourism, and existing housing vacancies.

2. San Francisco, California: -6.1%

Prices overshot fundamentals; median home value is around $1.3 million, far above what local incomes can sustain.

3. Austin, Texas: -5.1%

Booming construction led to oversupply, even with strong population growth.

4: San Jose, California: -4.0%

Similar to San Francisco, with sky-high average home prices (over $1.4 million).

5: Honolulu, Hawaii & Denver, Colorado: -3.8% (tied)

Honolulu rarely sees price declines, but pandemic-era growth was unsustainable. Denver, a pandemic “darling,” faces the same correction.

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What This Means for Buyers and Investors

While nationwide declines may seem modest, local downturns of 5–15% are significant. For buyers, this could mean opportunities in previously overheated markets. For investors, it’s a reminder to:

• • Avoid timing the market.
  • Focus on cash flow and fundamentals.
  • Account for hidden costs like insurance and property taxes.

Real estate remains hyper-local. Some cities will keep appreciating while others will correct sharply. As always, the key is buying smart, not chasing the market.

Source

https://www.zillow.com/research/home-value-sales-forecast-33822/

https://www.resiclubanalytics.com/p/zillow-updates-home-price-forecast-for-over-400-housing-markets-see-the-map-279d

https://www.aol.com/20-cities-where-home-prices-135808565.html

https://www.resiclubanalytics.com/p/zillow-updates-home-price-forecast-for-over-400-housing-markets-see-the-map-279d