For homeowners in Suwannee County, the recent news on the U.S. housing market might feel like a cold splash of water. According to Zillow, the number of homes that have lost value in the past year is at its highest since the aftermath of the Great Recession. In October, 53% of homes saw their “Zestimates” decline, the highest percentage since 2012 and a significant jump from just 16% a year earlier.
Regional Differences in Home Values
However, it’s crucial to note that these losses have been most widespread in the West and South. Housing markets in those regions have seen nearly all homes decline in value over the last year. Cities like Denver, Austin, Sacramento, Phoenix, and Dallas top the list with figures ranging from 87% to 91%. In contrast, the Northeast and Midwest have largely sidestepped these losses. However, Zillow warns that declines are spreading to more homes in all metros.
Most homes have also slipped from their peak valuations, with the average drawdown hitting 9.7%. While this figure has soared from 3.5% in the spring of last year, it’s still well below the 27% average drawdown in early 2012.
What Does This Mean for Homeowners?
It’s important to understand that lower home values are just losses on paper and aren’t realized by homeowners unless actual sale prices undercut their initial purchase prices. By that score, homeowners are still ahead. Zillow data shows that values are up a median 67% since the last sale, and just 4.1% of homes have lost value since their last sale.
“Homeowners may feel rattled when they see their Zestimate drop, and it’s more common in today’s cooler market environment than in recent years. But relatively few are selling at a loss,” said Treh Manhertz, senior economic researcher at Zillow. “Home values surged over the past six years, and the vast majority of homeowners still have significant equity. What we’re seeing now is a normalization, not a crash.”
The Impact of the Federal Reserve’s Rate Hikes
The dip in home values comes as the housing market has been largely stagnant for much of the past three years. Rate hikes from the Federal Reserve in 2022 and 2023 sent borrowing costs higher, discouraging homeowners from giving up their existing ultra-low mortgage rates.
However, the lack of new supply kept home prices high, shutting out many would-be homebuyers who were also put off by elevated mortgage rates.
Shift in the Housing Market
With demand weak, the housing market has been shifting away from sellers and toward buyers. This swing has been so dramatic that delistings have soared as sellers become frustrated with offers coming in below asking prices and opt to take their homes off the market.
But the National Association of Realtors sees a turnaround coming next year. NAR Chief Economist Lawrence Yun predicted earlier this month that existing-home sales will jump 14% in 2026 after three years of stagnation, with new-home sales rising 5%. These sales are expected to support a 4% uptick in home prices.
“Next year is really the year that we will see a measurable increase in sales,” said Yun. “Home prices nationwide are in no danger of declining.”
While this news might not immediately alleviate concerns about dropping home values, it does offer a glimmer of hope for the future. As we navigate the ever-evolving world of real estate, it’s always essential to stay informed and understand the complexities of the market.
