The U.S. housing market in 2025 is shifting away from the rapid, nationwide gains of the early 2020s toward slower, more uneven growth. While national averages suggest moderation, they mask a deep divide between cooling markets in the South and West and supply-constrained regions in the Northeast and Midwest.
Understanding this split is crucial for buyers, sellers, and investors. National appreciation rates have dropped to a modest 0.5%–2.8% year-over-year, yet some metros continue to post strong gains. This guide unpacks the historical context, current regional trends, and expert forecasts to reveal where home prices are holding firm, and where they’re falling.
TL;DR
- National home price growth has cooled to 0.5%–2.8% year-over-year in 2025.
- South and West markets are rebalancing, with price drops in metros like Austin and Miami.
- Northeast and Midwest prices remain high due to chronic supply shortages.
- Long-term averages hover around 4.3%–4.7% annual growth.
- Forecasts call for 3%–4% national appreciation through 2026, with mortgage rates in the mid-6% range.
Understanding the National Average
National home price appreciation is a widely quoted figure, but it’s often misunderstood. While it can offer a high-level market snapshot, it also hides the complexity of historical patterns, recent anomalies, and the stark differences between regional markets. To grasp what’s happening in 2025, it’s important to break the national number into its components.
U.S. National Home Price Appreciation: Historical vs. Recent
Historical Norms vs. Pandemic Spike
Historically, U.S. home prices have increased at a steady, moderate pace. The FHFA House Price Index (HPI) shows an average annual growth rate of about 4.3% since 1991 and 4.7% since 2000. These figures reflect long-term stability, with typical five-year periods seeing roughly 20% cumulative appreciation.
The pandemic years disrupted this pattern dramatically. From 2019 to 2024, home prices surged about 55% nationwide, averaging roughly 9.2% per year. This was fueled by ultra-low interest rates, rapid in-migration to certain regions, and severe supply shortages. While this period was highly profitable for sellers, it represented an unsustainable break from historical norms.
Why Wasn’t the Spike Wasn’t Sustainable?
The extraordinary surge in home prices from 2019 to 2024 was fueled by several unique conditions that couldn’t last indefinitely. These factors combined to push appreciation far above historical norms, but they also planted the seeds for a slowdown.
Ultra-Low Interest Rates Created Artificial Demand
Mortgage rates fell to record lows during the pandemic, in some cases below 3%. This drastically increased buying power and encouraged households to purchase sooner than planned. Once rates normalized in 2022–2023, demand cooled rapidly, revealing the temporary nature of this driver.
Pandemic Migration Patterns Were Temporary
The remote work boom triggered mass relocation to lower-cost, higher-space markets, especially in the South and West. This sudden demand surge drove double-digit gains, but as migration stabilized and return-to-office policies emerged, those markets lost the inflow that had been inflating prices.
Supply Constraints Pushed Prices Beyond Fundamentals
While demand soared, available inventory lagged far behind due to construction delays, zoning restrictions, and pandemic-related labor/material shortages. With fewer homes on the market, bidding wars became common. As supply chains improved and building resumed, price pressure began to ease.
Affordability Reached a Breaking Point
Rapid appreciation outpaced wage growth by a wide margin. By 2023–2024, even with low rates fading, many households could no longer qualify for mortgages in their desired markets. This affordability ceiling limited how much higher prices could climb, forcing a deceleration.
Current National Growth Rates
Mid-2025 data from major housing indices show a market in cool-down mode:
- FHFA HPI: 2.8% year-over-year increase.
- Redfin: 1.0% year-over-year increase in median sale price.
- Zillow: 0.5% year-over-year increase in typical home values.
While the differences stem from methodology, all three show sharp deceleration from pandemic-era highs. These smaller gains indicate a market less driven by speculative buying and more shaped by sustainable demand and local inventory conditions.
Read More: Average Home Appreciation Rate by State (5-Year View)
Regional Breakdown: South and West
The South and West were the clear winners of the pandemic housing boom, benefiting from population inflows, lower costs of living (at the time), and expansive new construction. In 2025, these same regions are leading the slowdown, with price growth stalling or reversing in several metros.
Post-Boom Rebalancing
The surge in demand between 2020 and 2022 pushed South and West home prices to record highs. Builders responded aggressively, especially in states with fewer zoning restrictions. By mid-2025, inventory in the West was up 32.5% year-over-year, and the South saw a 25.4% increase. This oversupply has eased competition, leading to modest year-over-year price declines.
Key Metro Examples
Here’s an example of key cities:
Austin, Texas
Austin became a pandemic-era hotspot for remote workers and corporate relocations. However, rapid construction and slowing in-migration have turned the tide. Median listing prices are down nearly 15% from their peak, with a year-over-year drop of 4.9% in July 2025.
Miami, Florida
Miami experienced one of the fastest price accelerations during the boom, partly driven by foreign investment and tax migration. Prices have since fallen about 19% over three years, with a 4.7% decline year-over-year. Increased inventory and more cautious buyers have shifted negotiating power back toward purchasers.
Read More: Cheapest States to Live In: Rent, Taxes, and Livability Compared
Regional Breakdown: Northeast and Midwest
The Northeast and Midwest housing markets have shown more stability compared to the South and West in 2025. Tighter inventory, stronger local economies, and less speculative buying during the pandemic have kept price growth steadier, though not immune to wider market pressures.
Steady but Slower Growth
While the South and West saw double-digit appreciation during the boom years, the Northeast and Midwest experienced more modest gains. This tempered growth has helped shield them from sharp corrections. In July 2025, year-over-year price growth in these regions averaged between 0.5% and 1.8%, with several metros still posting small gains.
Key Metro Examples
Boston, Massachusetts
Boston’s limited housing supply and high demand from medical, tech, and educational sectors have kept the market resilient. Median listing prices in July 2025 were $759,950, representing a 1.6% year-over-year increase, with inventory remaining tight despite slight increases in new listings.
Chicago, Illinois
Chicago has seen moderate appreciation, supported by steady job growth and affordable housing relative to coastal markets. Median listing prices in July 2025 stood at $345,000, with a small 0.8% annual increase. Inventory has risen, but not enough to tilt the balance toward a buyer’s market.
Read More: Top States People Are Moving To in 2025 (and Why)
What Drives Price Appreciation or Decline of Real Estate?
Home values move in response to a mix of economic, demographic, and policy-related factors. Understanding these drivers can help investors, buyers, and policymakers anticipate changes and make more informed decisions.
Macroeconomic Factors
Macroeconomic conditions shape overall housing demand and affordability.
High Interest Rates
When mortgage rates rise, borrowing costs increase, making homes less affordable. This often reduces buyer competition and slows price growth, especially in already high-priced markets.
Inflation
Persistent inflation raises construction and renovation costs, limiting new supply while also eroding buyer purchasing power. This can create upward pressure on prices despite reduced demand.
Read More: How Interest Rate Hikes Are Reshaping Real Estate Pricing
Demographic Trends
Population shifts and lifestyle preferences significantly influence housing market dynamics.
Migration Patterns
States attracting new residents, often due to job opportunities or favorable tax climates, experience stronger price growth and tighter inventories.
Aging Buyers
Older homeowners downsizing can release more inventory into the market, easing price pressure in certain regions.
Multi-Generational Living
The growing trend of extended families living together fuels demand for larger homes with flexible layouts, boosting prices in specific suburban and rural markets.
Read More: Sunbelt Boom: Why Investors Are Eyeing These Southern States
Policy and Supply Dynamics
Government regulations and construction activity directly impact housing availability.
Zoning Laws
Restrictive zoning policies can constrain development, causing prices to rise in supply-limited areas.
New Construction Trends
Regions with active building pipelines may see more balanced supply-demand conditions, slowing price growth and creating better opportunities for buyers.
Read More: What Is Zoning in Real Estate? A Complete Guide for Investors
Conclusion
In 2025, relying solely on national housing price averages won’t give you the full story. Regional supply-demand shifts, policy changes, and mortgage rate trends will shape the real picture. Stay informed with localized data and market-specific insights. Subscribe to the ZeroFlux newsletter for in-depth coverage and smarter real estate decisions.
FAQs
What Is The Historical Average U.S. Home Price Growth?
Over the past 50 years, U.S. home prices have increased by an average of 4–5% annually. However, this long-term trend masks significant short-term fluctuations driven by economic cycles, mortgage rates, and local market conditions.
Why Are South And West Markets Cooling Faster?
Southern and Western markets are seeing slower growth due to higher inventory levels, affordability challenges, and migration shifts. These regions experienced rapid pandemic-era appreciation, so prices are now adjusting closer to sustainable long-term growth rates.
Which Regions Are Still Seeing Strong Price Gains?
Select Midwest and Northeast markets continue to post strong annual gains. Factors include limited housing supply, strong job markets, and stable local economies, which help sustain buyer demand even in a higher interest rate environment.
How Will Mortgage Rates Affect 2025–2026 Prices?
Persistently high mortgage rates are expected to keep affordability in check, slowing price growth in most regions. However, rate cuts in late 2025 or 2026 could spark renewed buyer activity, potentially boosting prices in competitive markets.
