High interest rates and broader economic headwinds made 2025 a difficult year for the real estate market, and prices took a tumble.<\/p>\n
In December, median home prices declined 0.6% year over year nationwide, according to the\u00a0Realtor.com\u00ae<\/a>\u00a0December 2025 Monthly Housing Trends<\/a>\u00a0report.<\/p>\n Regionally, prices fell 1.1% in the South and 1.8% in the West since the year-ago period.<\/p>\n One reason for these price declines is diminishing demand.<\/p>\n \u201cIt was a really slow 2025, and I think the big reason for that is economic uncertainty among buyers,\u201d says\u00a0Joel Berner, senior economist at\u00a0Realtor.com. \u201cPeople are really worried about their income and not really feeling like it\u2019s a great time for them to make a move.\u201d<\/p>\n The metro with biggest price drop was Austin<\/p>\n In the last 12 months, housing prices fell in 26 of the 50 largest metros year over year.<\/p>\n Of the 50 largest metros,\u00a0Austin-Round Rock-San Marcos, TX, saw the biggest price drop<\/a> in the last 12 months, with median home prices falling 7.3%.<\/p>\n \u201cThe main reason is inventory growth, especially in Austin, which had the largest price decline,\u201d says Berner. \u201cInventory is above pre-pandemic levels, and there are just a lot of homes on the market. There are several reasons for that, but it seems that mortgage rates and affordability are keeping people out of the market and keeping things pretty slow.\u201d<\/p>\n Berner says that, as a result, sellers are having to compete with each other a lot more. \u201cWe\u2019re seeing a lot of price cuts and a lot of softness in those prices just because there are more homes on the market,\u201d he explains.<\/p>\n The pandemic also has something to do with the reduction in Austin prices.<\/p>\n \u201cIn Austin, we have been all over the news as the No. 1 major metro to have prices go down, but it is simply because we had the most drastic spike during the pandemic,\u201d says\u00a0Samantha Midler\u00a0of\u00a0Austin Portfolio Real Estate. \u201cTexas\u00a0<\/a>had looser restrictions and wide open spaces, so everyone and their mother moved here. It was an artificial demand that was crazy and unsustainable.\u201d<\/p>\n Austin, TX, saw the biggest price decline at 7.3%, due to inventory growth and past \u201cunsustainable\u201d demand. Matt \u2013 stock.adobe.com<\/p>\n Berner agrees, saying, \u201cIn some of these Sun Belt markets where prices just got super out of whack a few years ago, they are slowly getting back to where they should be.\u201d<\/p>\n Midler says now that prices have come back down to earth, the market is starting to move.<\/p>\n \u201cBuyers are getting used to the 6% interest rate range and are done waiting,\u201d she says. \u201cWe are seeing more mortgage applications being filled out and buyers are getting off the bench.\u201d<\/p>\n But\u00a0Noa Levy, broker at\u00a0The Boutique Real Estate\u00a0in\u00a0Austin, says some sellers are still resistant to lowering their prices. \u201cIn Austin in particular, many sellers are not under any financial pressure to sell and will only move forward if they achieve their desired pricing,\u201d she says. \u201cWith the city\u2019s higher median income, sellers can afford to wait until a buyer is willing to meet their expectations.\u201d<\/p>\n Pair of California metros also saw major home price declines<\/p>\n Two metros in\u00a0California<\/a>\u00a0ranked in the top five for large metros experiencing the biggest year-over-year price drops.<\/p>\n In\u00a0San Diego-Chula Vista-Carlsbad,\u00a0median home prices plunged 6.7% and\u00a0San Jose-Sunnyvale-Santa Clara\u00a0saw median home prices dip 5.5%.<\/p>\n California agent\u00a0Cara Ameer<\/a>\u00a0tells Realtor.com, \u201cWhen you have the perfect storm of higher interest rates, inflation, higher homeowners insurance costs, and high condo fees, buyers aren\u2019t able to easily buy, and prices drop as a result.\u201d<\/p>\n Since renting can be significantly more affordable than buying home in California, that also has an impact on home prices and demand.<\/p>\n California metros San Diego and San Jose also saw major drops, alongside Minneapolis and Washington, DC. Wirestock \u2013 stock.adobe.com<\/p>\n \u201cThe affordability question really comes into play in California,\u201d says Berner. \u201cFolks feeling like they can\u2019t afford a monthly payment is a big problem, so people are just choosing to remain renters.\u201d<\/p>\n Berner says there\u2019s a lot of softness in the rental market, especially out West.<\/p>\n \u201cIn some of those markets where people\u2019s rents are stable or falling, they don\u2019t really feel a fire to go buy a home, because they\u2019re pretty comfortable where they are remaining as renters,\u201d he explains.<\/p>\n Minneapolis and Washington, DC, also saw price slumps<\/p>\n The other cities that round out the top 5 of largest metros recording the most significant price drops in December are\u00a0Minneapolis\u00a0and Washington, DC.<\/p>\n In\u00a0Minneapolis<\/a>-St. Paul-Bloomington<\/a>, MN-WI, median home prices ticked down 4.9%.<\/p>\n \u201cMarket conditions always dictate pricing. Certainly in many price points, interest rates and lack of buying power have had a profound impact,\u201d\u00a0Jeffrey Dewing\u00a0of\u00a0Coldwell Banker Realty\u00a0in Minneapolis tells Realtor.com. \u201cA lot of buyers, especially in the sub-million-dollar market, are waiting for interest rates to drop. We always see an influx in showing activity after interest rate drops are announced.\u201d<\/p>\n However, he says, \u201cOur buyers locally are more focused on finding the right home rather than waiting on the sidelines for price reductions, because good properties that are priced appropriately are moving swiftly.\u201d<\/p>\n In\u00a0Washington<\/a>\u2013Arlington<\/a>\u2013Alexandria<\/a>, DC-VA-MD-WV, median list prices fell by 4.8%.<\/p>\n Median home prices nationwide dropped 0.6% in Dec 2025 due to high interest rates, per Joel Berner, senior economist at Realtor.com. Sergey Novikov \u2013 stock.adobe.com<\/p>\n Recent mass layoffs, buyouts, and government shutdowns have\u00a0shaken the traditional notion<\/a>\u00a0of federal employment as secure, fostering unease among workers and affecting local housing markets.<\/p>\n \u201cThere is considerable weakness in the first-time homebuyer market here. Many first-time homeowners are faced with uncertainty in the local job market. If we couple this with the interest rates, it makes first-time buyers reluctant to move forward,\u201d\u00a0Michael Schaeffer, a\u00a0Coldwell Banker<\/a>\u00a0real estate agent in\u00a0Washington<\/a>, DC, tells Realtor.com.<\/p>\n Even so, Schaeffer says some sellers are opposed to reducing prices due to pandemic-level expectations. \u201cWe have had a number of sellers rent their properties rather than sell, unless it is an estate sale or a forced sale due to divorce or relocation.\u201d<\/p>\n But he says, \u201cIf the perception of value is there, we are still seeing buyers offer above the list price, but these are isolated cases.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"High interest rates and broader economic headwinds made 2025 a difficult year for the real estate market, and…\n","protected":false},"author":2,"featured_media":361970,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,776,1294,124597,32855,4655,3329,56,54,55,803],"class_list":{"0":"post-361969","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-california","10":"tag-economy","11":"tag-homeowners","12":"tag-minneapolis","13":"tag-real-estate","14":"tag-texas","15":"tag-uk","16":"tag-united-kingdom","17":"tag-unitedkingdom","18":"tag-washington-dc"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/361969","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=361969"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/361969\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/361970"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=361969"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=361969"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=361969"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}