Home Prices Falling Fastest in December 2025 — What Buyers and Sellers Need to Know
As 2025 drew to a close, the U.S. housing market delivered one of its most telling signals yet: home prices slowed and, in many major metros, actually fell year-over-year in December. Nationwide, this marked an ongoing shift from the post-pandemic boom to a more balanced, buyer-friendly market — driven by high mortgage rates, rising inventory, and cautious buyer demand.
Let’s break down what’s happening, where prices are dropping most, and what this could mean for the 2026 market.
December 2025: Prices Down Nationally
According to the Realtor.com Monthly Housing Market Trends Report for December 2025:
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Active listings rose 12.1% year-over-year, giving buyers more options than the prior year.
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Median list prices edged down about 0.6% compared to December 2024, reflecting price softening nationwide.
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Prices fell in 26 of the 50 largest U.S. metro areas, underscoring that pricing pressure isn’t isolated to just a few cities.
This price movement capped off a challenging year for housing — one characterized by more available homes, longer days on market, and a market that increasingly favors value rather than bidding wars.
Markets with the Fastest Price Drops
A Realtor.com analysis shows that some of the sharpest annual price declines by the end of 2025 were in major metropolitan areas across the country.
Top Declining Metros (Annual YoY)
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Austin-Round Rock-San Marcos, TX — Down ~7.3%
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San Diego-Chula Vista-Carlsbad, CA — Down ~6.7%
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San Jose-Sunnyvale-Santa Clara, CA — Down ~5.5%
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Minneapolis-St. Paul-Bloomington, MN-WI — Down ~4.9%
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Washington-Arlington-Alexandria, DC-MD-VA-WV — Down ~4.8%
These declines reflect regional price corrections as inventory grows and buyer demand softens after years of record growth.
Why Are Home Prices Falling?
Several key dynamics helped push prices downward in late 2025:
1. Mortgage Rates Remained Elevated
Although mortgage rates dipped slightly toward the end of the year, they stayed elevated compared to the ultra-low rates that fueled the pandemic boom. For example, 30-year fixed mortgage rates hovered just above 6% in late 2025.
High borrowing costs kept some buyers on the sidelines, reducing competitive pressure on listing prices.
2. Inventory Has Increased
Inventory — the number of homes actively for sale — continued to expand year-over-year for two straight years, even if seasonally it dipped in December. More choices for buyers reduce urgency and empower negotiations.
3. Homes Are Taking Longer to Sell
Homes in December 2025 spent longer on the market compared to the same time in 2024 — a signal that buyers were slower to act and pricing needed to adjust accordingly.
4. Sellers Adjusting to New Reality
With less frenzy and more inventory, sellers who priced aggressively found themselves needing to make price reductions or re-evaluate expectations. Price cuts were common across regions as markets recalibrated.
Implications for Buyers in 2026
Buyers Have More Leverage
After years of bidding wars and waived inspections, the housing market entering 2026 looks more buyer-friendly:
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More inventory = more options
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Buyers can negotiate contingencies and repairs
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Price reductions happen in many listings
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Less competition means calmer decision-making
Even as mortgage rates remain a factor, buyers who are financially prepared and realistic about local pricing trends stand to benefit in a market where homes no longer sell instantly.
What Sellers Should Consider
For sellers, the December 2025 trend of falling prices highlights the importance of strategy:
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Pricing accurately from the start: Overpricing can lead to extended time on market and eventual price cuts.
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Understanding local trends: National averages matter, but price shifts vary widely by metro and neighborhood.
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Presentation and marketing: Homes in good condition, professionally staged, and marketed stand out even in slower areas.
In many markets, sellers still sell — but they sell based on condition, value, and realistic expectations.
Mixed Signals Still Exist Regionally
While the overall national picture shows softening prices, trends vary across regions:
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Some markets in the Midwest and Northeast still saw modest price gains or smaller declines.
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Still, major metros like Austin and San Diego reflect broader affordability pressures and shifting demand.
This divergence means local expertise matters more than ever in interpreting data and advising buyers or sellers.
Looking Ahead: 2026 Housing Themes
Although December 2025 painted a picture of cooling prices, housing market forecasts suggest 2026 could bring modest stabilization — with several key themes shaping the year:
Stable Mortgage Rates With Modest Softening
Mortgage rates may continue to drift in a narrow range (often cited around the mid-5%–6% area), helping buyers plan purchases and affordability with greater confidence.
Inventory Normalization
After inventory growth for over two years, listing levels are expected to move closer to pre-pandemic norms, reducing volatility and bringing renewed balance.
Regional Opportunities and Headwinds
Markets that saw steep price drops could become attractive for long-term buyers, while hotter markets may offer quicker appreciation depending on job growth and affordability.
Conclusion
The December 2025 housing data — with falling home prices in many major markets and increased inventory — signals a meaningful shift from the pandemic’s runaway growth era to a more balanced, strategic real estate environment. Buyers stand to benefit from more choices and negotiating leverage, while sellers must align their expectations with current market realities.
Understanding how these trends impact your local market will be key in navigating 2026 with confidence — whether you’re buying your first home, selling, or investing in real estate.
If you’d like a local breakdown of trends specific to your city or neighborhood for 2026, I can tailor the data and insights to your exact area — just ask!
