Home prices may be about to turn negative

Everyone knows the housing market has been in a slump for three years. But even as home sales are still 2 million fewer each year than during the peak of the frenzy, home prices, nationally, are still at record highs. Home prices have defied the slow market and continued to climb, year after year. That may be, finally, about to change.

There are lots of ways to measure home prices. Repeat-sales indexes like the S&P Cotality Case Shiller are very effective at tracking changes in the value of homes, but are very slow and lag the actual market. Market-based measures like the Altos price or the Altos pending price are immediate and best to answer “What do homes cost today?”

These measures move together generally but can have subtle differences in timing and noise. For this reason, I like using price per square foot as a handy, normalized measure of home prices. It is immediately available, has less noise, and controls for some of the shifting mix of properties that can cloud some price measures.

I was recently looking at the weekly Altos price-per-square-foot data and it highlighted an important trend that is harder to see in the other measures of home prices in mid-summer 2025: Home prices are about to turn negative compared to last year.

You can see in the data that home prices have a normal seasonal peak in May or June and then decline for the second half of the year. This year, home prices peaked at $223/sqft in the last week of May, about 2% above last year at the same time. These were very slight home price gains for the year, but gains nonetheless.

But, after the June seasonal peak, this data clearly shows prices are declining faster than normal and the line is about to dip below 2024.

I built this animation to illustrate what’s happening. We start the series with a view of home prices in 2022 compared to 2021. The spring of 2022 was the tail end of the pandemic buying frenzy. Everyone knew at the time that rates were rising and potential homebuyers were still rushing to get their hands on anything they could. Those buyers drove prices up rapidly in the first and second quarters.

That demand stopped cold in June 2022. In the second half of 2022, demand dropped dramatically and prices adjusted rapidly too. The change was so abrupt that by the spring of 2023, home prices were below those of the prior year. This negative home price change can be seen here in the price-per-square-foot data, and it was also measured by all the home price indexes, like the Case Shiller Index, which came out several months after the news.

By the end of 2023 market demand had normalized a bit, enough so that prices for the full year 2023 finished with gains.

2024 was a different story. By mid-year, home-price appreciation looked weak, but the September 2024 drop in mortgage rates moved the needle enough with buyers that prices stayed buoyed late into Q4. Despite historically weak homebuyer demand, home prices finished 2024 with annual gains yet again.

And that brings us to today. Home prices, as highlighted by this price-per-square-foot data, are moving lower each week. The seasonal decline is faster than normal and as a result, in a few weeks, it looks like this will be the first major indicator to show negative home-price changes.

Why is this finally happening now when demand has been weak for three full years? It seems that three years of rising inventory finally built the market with sufficient supply to be greater than the tepid demand. There were so few homes available for so long that even with historically light demand, demand still outweighed supply. With 860,000 single family homes unsold on the market, we’re now clearly out of the pandemic-shortage era and back to old-normal levels of inventory. Supply is finally winning the supply/demand balance. (This has been true in a much of the country, especially the Sub Belt, for a while of course. It took until Q3 2025 for it to be true for the nation as a whole.)

Most other home-price headlines you’ll read in August 2025 are still showing slight 2-3% home price gains over 2024. Those data sets have not moved negative yet. So the headlines are still saying “home prices hit new record highs.” Those headlines are about to change.

When potential homebuyers and sellers start hearing negative headlines, they’ll need new insights. Sellers will need to price strategically, to be in front of this curve rather than behind it. They’ll need to know how steep this decline is. Are price drops accelerating? There will be lots of data to report on in the coming weeks. Stay tuned.