The U.S. housing market may have hit its ceiling. After years of record highs, home prices in key metro areas are now slipping—marking the early signs of a broader market decline expected later this year.
According to new data from Redfin and Zillow, cities like Austin, Phoenix, and San Francisco are experiencing measurable drops in median home prices. In some zip codes, prices have fallen by as much as 7% compared to last year. The declines, though uneven, are raising eyebrows across the industry.
“We’re seeing fatigue in both buyers and sellers,” said one real estate economist. “This isn’t a crash, but it’s a cooling that could accelerate.”
Early declines in overheated cities
The correction is most visible in regions that saw the steepest gains post-pandemic. Austin, once America’s hottest housing market, has posted three consecutive months of price declines. Phoenix and Boise are also trending down, reversing the speculative run-ups that defined 2021 and 2022.
Even pricier coastal markets are starting to show cracks. San Francisco’s median price is down 3.5% year-over-year, while parts of Los Angeles and Seattle have seen listings sit longer and attract fewer bids.
“Affordability has been stretched to the brink,” said a Redfin market analyst. “Something had to give.”
Why prices are falling now
Several factors are contributing to the shift. Mortgage rates, while off their 2023 highs, remain elevated enough to keep buyers cautious. Inventory is creeping up as would-be sellers accept that the era of bidding wars may be over. And with inflation lingering, many households are opting to rent longer or relocate to cheaper states.
Analysts say this is more of a normalization than a freefall. But with over-leveraged buyers and developers still in the mix, volatility remains a risk.
“Markets don’t correct all at once,” said a housing strategist. “They erode in layers, and we’re seeing the first one now.”
What happens next
While national home prices are still slightly up year-over-year, the rate of growth has slowed to its lowest point since 2019. If current trends hold, experts expect more widespread declines by Q4 of this year.
Institutional investors, once key players in propping up demand, have already begun to scale back purchases. That could open the door for first-time buyers—but only if prices fall enough to reset affordability.
For now, the market is entering a new phase. Not a crash, but a turning tide.
