The U.S. housing market is experiencing a noticeable slowdown in price growth due to rising supply and a decline in demand. According to the S&P CoreLogic Case-Shiller Index, home prices in April rose by just 2.7% year-over-year — a significant drop from the 3.4% increase recorded in March. This represents the smallest annual gain in nearly two years. More recent data from Parcl Labs suggests prices are now flat compared to a year ago, signaling that the deceleration in the housing market is gaining momentum.
Regional Market Shift Favors Midwest and Northeast as Sun Belt Cools Rapidly
The slowdown in price appreciation is not limited to a few areas; it spans across the 10- and 20-city composites tracked by the S&P index, both of which have dropped notably from recent peaks. Much of the annual growth seen in the April report was concentrated in just the past six months, driven by the spring selling season rather than sustained growth.
The market is also undergoing a regional realignment: areas that were booming during the pandemic are now cooling off, while more stable regions in the Midwest and Northeast are emerging as new leaders in price growth.
Cooling U.S. Housing Market Sees Price Growth Slow as Midwest Gains and Sun Belt FadesNew York, Chicago, and Detroit are now leading in annual price increases, with New York seeing a 7.9% rise. This is a stark contrast to early pandemic trends, where cities in the Sun Belt, like Tampa and Dallas, dominated with rapid price gains.
However, those once-hot markets are now cooling; Tampa and Dallas have posted annual declines of 2.2% and 0.2% respectively, while San Francisco remains flat and Phoenix and Miami are barely growing. This reversal points to a rebalancing based more on long-term fundamentals than speculative trends.
High Mortgage Rates and Limited Supply Keep Housing Prices from Major Decline
One of the key drivers behind the cooling market is persistently high mortgage rates. Rates topped 7% in April and remain just below that level, keeping monthly mortgage payments near all-time highs. This is pushing many potential buyers — especially first-time buyers — out of the market. In May, first-time buyers made up just 30% of home purchases, far below the historical average of 40%. Affordability challenges are limiting demand, which in turn is putting downward pressure on home prices.
Although the number of homes for sale is increasing, it remains below pre-pandemic levels. Only 6% of sellers are at risk of selling at a loss, indicating that most homeowners are still in strong equity positions. Experts like Nicholas Godec emphasize that a full-blown price collapse is unlikely, as supply remains constrained and many homeowners are locked into low mortgage rates from the pandemic era. With new construction lagging behind demand, this ongoing supply-demand imbalance is expected to maintain a floor under prices, preventing a repeat of the sharp declines seen during the Great Recession.
