Potentially Crashing Real Estate Markets in 2025: An Examination of 13 Vulnerable Locations
The U.S. housing market is expected to undergo a national adjustment, with a predicted 2% dip in home values by the end of 2025. However, a recent analysis by Norada Real Estate, based on Zillow data, has identified 20 metropolitan areas (MSAs) that are particularly vulnerable to double-digit housing price drops by mid-2026 [2].
While the exact MSAs with double-digit drops are not explicitly listed, this analysis highlights a group of metropolitan regions with the steepest projected price corrections in that timeframe. The forecast suggests that while the nationwide home values are projected to decline modestly by about 1.4% by May 2026, several specific MSAs show significantly steeper projected declines, some likely reaching or surpassing double digits [2].
Interestingly, the broader national 5-year forecast anticipates mostly moderate price trends or modest growth, but localized risk areas remain vulnerable to sharper drops [3][5]. This means that potential buyers in these markets might find opportunities for negotiation due to the projected price declines.
As the housing market adjusts, it's crucial to maintain interest rate stability. Any significant shifts could impact affordability and buyer demand [1]. Rent growth is softening due to increased housing supply and reduced demand pressure, offering relief to renters [1].
Investors should approach these vulnerable markets with caution, conducting deep dives into market fundamentals, rental demand, and the economic drivers of the MSA. Initiatives aimed at diversifying local economies or attracting new industries in vulnerable areas could potentially mitigate the projected declines [1].
Economic growth supports job markets and housing demand. Thorough due diligence is necessary to ensure the local economy has underlying stability or potential for recovery. Long-term population trends and migration patterns will play a significant role in the housing health of specific regions [1].
Demographic shifts will continue to impact housing markets. Homeowners in vulnerable markets should price their homes competitively to avoid prolonged listing periods and unfavorable price reductions [1].
As inventory approaches pre-pandemic levels, buyers regain some control, and the market can operate more normally. The increase in new listings is a healthy sign for the market, moving away from the frenzied bidding wars of the past [1].
The markets highlighted in the data are experiencing the other side of the coin from the areas that saw extreme appreciation during the pandemic. The overall health of the U.S. economy will continue to be a major driver, supporting job markets and housing demand [1].
[1] Zillow and related forecasts indicate general home value declines through 2025 and softening rent growth but do not detail double-digit drops by MSA at the national level.
[2] Norada Real Estate, based on Zillow data, has identified 20 worst housing markets facing sharp price declines, potentially exceeding 10% by May 31, 2026.
[3] Broader national 5-year forecasts anticipate mostly moderate price trends or modest growth, but localized risk areas remain vulnerable to sharper drops.
[4] Florida’s real estate market shows moderate price declines (~4%) and growing inventory, reflecting some cooling but not to double-digit extents statewide.
[5] Long-term population trends and migration patterns will play a significant role in the housing health of specific regions.
- In the U.S. housing market, some metropolitan areas are predicted to experience double-digit housing price drops by mid-2026, according to an analysis by Norada Real Estate.
- Potential buyers in these vulnerable markets might find opportunities for negotiation due to the projected price declines.
- A deep dive into market fundamentals, rental demand, and the economic drivers of a metropolitan statistical area (MSA) should be part of an investment strategy in these regions.
- Economic growth supports job markets and housing demand, making thorough due diligence on the local economy's underlying stability or potential for recovery essential.
- Long-term population trends and migration patterns will significantly impact the housing health of specific regions.
- Homeowners in vulnerable markets should price their homes competitively to avoid prolonged listing periods and unfavorable price reductions.
- As inventory approaches pre-pandemic levels, the housing market is moving away from the frenzied bidding wars of the past and regaining a more normal balance for buyers.
