Zillow: Housing market to see first annual U.S. home price drop since 2011

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This week, Zillow economists published their updated 12-month forecast, projecting that U.S. home prices—as measured by the Zillow Home Value Index—will fall by 0.9% between April 2025 and April 2026. 

After a series of downward revisions—beginning in January, when Zillow’s 12-month national home price forecast was +2.9%, and subsequently lowered each month until reaching -1.7% last month—Zillow has finally stopped downgrading its outlook.

That said, it’s fair to call the Zillow economist bearish, given that for this forecast to be correct, 2025 would mark the first calendar-year home price decline since 2011.

Why did Zillow downgrade its forecast for national home prices so many times this year?

“The rise in [active] listings is fueling softer price growth, as greater supply provides more options and more bargaining power for buyers,” Zillow economists wrote in March. “Potential buyers are opting to remain renters for longer as affordability challenges suppress demand for home purchases.” 

Zillow thinks strained housing affordability—caused by U.S. home prices rising over 40% during the pandemic housing boom and mortgage rates spiking from 3% to 6% in 2022—is weighing on price growth.

“Affordability is still challenging buyers. A mortgage payment on a typical home in March required about 35.3% of median household income nationwide when using a 20% down payment,” wrote Zillow chief economist Skylar Olsen last month. “That’s a slight improvement over last year, but is still unaffordable. Spending more than 30% of income on housing is considered a financial burden, and a 20% down payment is a steep entry fee, coming out to about $72,000 on the typical U.S. home.”

According to Zillow’s home price model, the listing site also believes that weakening and softening housing markets across the Sun Belt will weigh on nationally aggregated home prices this year. 

Among the 300 largest U.S. metro area housing markets, Zillow expects the strongest home price appreciation between April 2025 and April 2026 to occur in these 10 areas:

1. Atlantic City, NJ: 3.2%
2.  Kingston, NY: 2.6% 
3. Torrington, CT: 2.4% 
4. Knoxville, TN: 2.3% 
5. Rochester, NY: 2.2% 
6. Syracuse, NY: 2.0%
7. Vineland, NJ: 2.0% 
8. Fayetteville, AR: 1.9%
9. Concord, NH: 1.9%
10. Hilton Head Island, SC: 1.8%

And these are the 10 housing markets where Zillow expects the weakest home price appreciation over that time period:

1. Houma, LA: -10.2% 
2. Lake Charles, LA: -8.4% 
3. Alexandria, LA: -7.5% 
4. New Orleans, LA: -7.1% 
5. Lafayette, LA: -7.0% 
6. Shreveport, LA: -6.9% 
7. Beaumont, TX: -6.2% 
8. Midland, TX: -6.1% 
9. Monroe, LA: -5.5%
10. Odessa, TX: -5.3%

Below is what the current year-over-year rate of home price growth looks like for single-family and condo home prices. Florida is currently the epicenter of housing market weakness right now.