US Housing Market Weakness Deepens, Midwest Prices Signal Broad Downturn

Event summary

  • December 2025 existing-home median prices rose only 0.42% year-over-year, a significant drop from 5.85% the prior year.
  • New-home prices are down nearly 15% from their 2022 peak, with builder inventory reaching nine months of supply.
  • The Midwest experienced a year-over-year decline in median sales prices for the first time since late 2022.
  • 2025 home sales are estimated at 4.7 million units, well below the long-term average of 5.9 million.

The big picture

First American Properties' assessment highlights a significant structural shift in the US housing market, driven by affordability constraints and regional price declines. The market's performance, currently far below historical averages, suggests a prolonged recalibration period, potentially impacting the broader economy given the housing sector's significant contribution to GDP. The observed trends indicate that policy interventions alone are unlikely to reverse the current downward pressure.

What we're watching

Price Momentum
Whether the Midwest’s price decline will spread to other regions, potentially pushing national indices into negative territory, will be a key indicator of the market’s trajectory.
Builder Response
How builders adjust to the shift towards lower-priced homes and elevated inventory will influence overall market stability and potential for price stabilization.
Credit Stress
The continued rise in FHA serious delinquency rates suggests that affordability challenges will likely persist, potentially limiting any rebound in demand even with lower mortgage rates.