More than half of U.S. homes have dropped in value over the last year

In October, 53% of homes saw their appraisals drop, the largest drop since 2012, and up from just 16% the year before. Losses were more widespread in the west and south.

In fact, those areas have housing markets in which almost all homes have declined in value over the past year. Denver topped the list with 91%, followed by Austin (89%), Sacramento (88%), Phoenix (87%), and Dallas (87%).

By contrast, the Northeast and Midwest largely avoided such losses, but the declines spread to more homes in all metros, Zillow said.

Additionally, most homes have also declined from their peak ratings, with the average decline reaching 9.7%. Although this percentage is up from 3.5% in the spring of 2022, it is still well below the average drawdown of 27% in early 2012.

To be sure, home value declines are just losses on paper and homeowners don’t realize them unless actual sales prices undercut initial purchase prices.

With this result, homeowners are still ahead as Zillow data shows that values ​​have risen an average of 67% since their last sale, and only 4.1% of homes have lost value since their last sale.

“Homeowners may be upset when they see their estimates reduced, which is more common in today’s cooler market environment than in recent years. But relatively few are selling at a loss,” said Trey Manhertz, chief research economist at Zillow. In a statement. “Home values ​​have risen over the past six years, and the vast majority of homeowners still own a significant amount of equity. What we are seeing now is a return to normal, not a collapse.”

The lower values ​​come as the housing market has been frozen for much of the past three years after interest rate hikes by the Federal Reserve in 2022 and 2023 sent borrowing costs higher, discouraging homeowners from abandoning their current ultra-low mortgage rates.

But a dearth of new supply kept housing prices high, alienating many potential homebuyers who were also balking at high mortgage interest rates.

With weak demand, the housing market has shifted away from sellers and toward buyers. The pendulum has so far swung the other way, with delistings soaring this year, as sellers tired of offers coming in below asking prices took their homes off the market.

But the National Association of Realtors sees a shift coming in the coming year. NAR chief economist Lawrence Yun predicted Earlier this month Existing home sales are expected to jump 14% in 2026 after three years of recession, with new home sales rising 5%. These sales will support a 4% rise in home prices.

“Next year is actually the year in which we will see a noticeable increase in sales,” Yoon said at a conference on November 14. “House prices across the country are not at risk of falling.”