The 10 Cities Where Home Prices Are Dropping (and Rising) Fastest Right Now

A price reduced for sale sign is used to illustrate an article about places where home prices are falling. Credit: Daniel Acker/Bloomberg via Getty Images
A "price reduced" sign stands outside a home for sale in Spring Valley, Illinois.
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We haven’t seen a buyers market in more than two years. That’s starting to change. Depending on where you live, home prices are starting to drop. 

While home values ticked up 0.1% from August to September nationwide, more than 100 cities saw them drop, according to data from Zillow

The places that saw the biggest drops month-over-month are some of the metro areas that have been the hottest for years, including Phoenix, San Francisco, and Boise, Idaho.

The housing market appears to have run out of steam, with home sales dropping 23.8% year-over-year in September, according to the National Association of Realtors (NAR). 

With mortgage rates teetering around 7%, potential homebuyers simply can’t contend with high prices. Despite a 33.5% jump in active listings, demand for housing has plummeted. 

“The way our market softened and the number of buyers that are not in the market, it’s 100% correlated to interest rates,” says Monique Walker, a Arizona-based realtor with RE/MAX Excalibur. 

10 Cities Where Home Prices Are Dropping the Fastest

These are the areas that saw the biggest drop in home values from August to September.

Metro AreaTypical Home Value, Sep. 30Month-Over-Month ChangeYear-Over-Year Change
Mount Gay, WV$112,435-2.96%13.35%
Phoenix, AZ$459,441-1.96%12.82%
Reno, NV$554,380-1.83%6.53%
Boise City, ID$494,182-1.74%-1.63%
Sevierville, TN$435,072-1.71%22.39%
Kalispell, MT$700,135-1.65%25.40%
Grants Pass, OR$403,120-1.60%2.95%
San Francisco, CA$1,388,998-1.50%4.93%
Breckenridge, CO$1,039,166-1.47%20.46%
Sacramento, CA$597,181-1.33%7.22%

About These Numbers

NextAdvisor calculated these figures using monthly data from the Zillow Home Value Index. The index reflects the value of a typical home between the 35th and 65th percentile in a given area.

Why Home Prices Are Dropping in Some Areas

While fluctuations in home prices have a lot to do with local markets, no city is escaping the heat of inflation

Supply-chain issues and a recovering U.S. economy have driven inflation to levels not seen in decades. To tamp down inflation, the Federal Reserve has been hiking its benchmark short-term interest rate, the federal funds rate. This makes the cost of borrowing more expensive. Hence, mortgage rates are nearly double what they were at the start of 2022. 

During the COVID-19 pandemic, many people took advantage of the opportunity to work remotely by moving to a new metro area. The massive influx of potential buyers sent home prices soaring. Places like Phoenix and Boise are prime examples of this phenomenon. However, homebuyers were still able to afford these prices thanks to low mortgage rates – another product of the pandemic.  

Today? Not so much. 

With homebuyers struggling to contend with narrow affordability margins, sellers are having to drop their asking prices. We took a closer look at some of the metro areas where prices are falling the fastest. 

Phoenix

In 2021, Phoenix was the most popular migration destination in the United States. According to data from Redfin.com, around 85,000 people moved to Phoenix from other metro areas. Now that low mortgage rates are no longer on the table, demand for housing has decreased significantly. 

“When mortgage rates went up to 5% in May, I noticed the market shifting. I wasn’t getting those five to seven contracts within a week, nor was I getting 10 showings in four days,” Walker says. “Buyers saw their purchasing power go way down. The combination of rates and high prices was a real double whammy.”

Home prices, which soared well into May 2022, have dropped 1.96% between August and September. Prices are expected to drop even further as interest rates continue their climb. 

San Francisco

In San Francisco, where the average home value is just under $1.4 million, “The market has slowed dramatically in my area. Homes were selling after just two or three days on the market. Now, we’re looking at 30 to 45 days,” says Cindy Hagley, a California real estate broker.

Boise

During the height of the COVID-19 pandemic, Boise was a popular homebuying destination. As a result, home prices increased substantially and a sellers’ market was cemented. Now, as the housing market cools, those lofty prices are headed downhill fast. For owners who need to sell their homes, lowering their asking prices is the best way to attract potential buyers. 

10 Cities Where Home Prices Are Rising the Fastest

These are the areas that saw the biggest increase in home values from August to September.

Metro AreaTypical Home Value, Sep. 30Monthly ChangeYearly Change
Wooster, OH$449,6435.48%58.51%
Big Rapids, MI$187,2103.87%16.41%
Kapaa, HI$970,4892.58%34.55%
Branson, MO$259,7092.42%11.96%
Hinesville, GA$203,3981.91%20.33%
Montrose, CA$421,1991.85%19.71%
Baraboo, WI $275,0241.77%16.85%
Laconia, NH$444,7251.73%18.89%
Barre, VT$359,5661.69%22.37%
El Centro, CA$344,3681.67%19.39%
Source: Zillow Home Value Index

How Homebuyers Can Deal With Changing Prices 

If you’re looking to purchase a home, try not to get caught up in the national trends. At the end of the day, it’s what’s happening in your metro area that matters most. 

Trying to time the house market will prove to be an exhausting and often unsuccessful process. What homebuyers can expect, however, is for mortgage rates to stay at higher levels well into 2023.

Right now, being cautious with how you spend your money is more important than ever. Experts recommend against rushing out to buy a house just because prices are beginning to dip. Instead, do things like shopping around for lenders, contributing to your emergency fund in a high-yield savings account, and making sure you can afford the monthly payments when rates rise again. 

“The decision to buy a home is obviously financial, but it’s also a lifestyle decision,” says Odeta Kushi, deputy chief economist at First American Financial Corporation. 

You may be in the right place to buy if you have an adequate emergency fund, flexible budget, and income security. Particularly in a rising rate environment, you’ll want to have some wiggle room in your budget so you can make your monthly mortgage payments even if rates go up dramatically. 

Adjust Your Expectations 

Historically speaking, mortgage rates around 7% are fairly normal. However, after nearly a decade of rates around 2% and 3%, it’s not surprising those same numbers are now a tough pill to swallow. But this doesn’t mean it’s a bad time to purchase a home. 

“For buyers and sellers, you can wait a year if you want, but the market is probably going to be either the same or a little worse. But this is just a cycle in the market and the market isn’t going to change dramatically that quickly,” Walker says. “Rates aren’t just going to drop down to 3% all of a sudden.” 

Be Patient

In a market where home prices are falling but affordability is still out of reach, your best bet might be to be patient. 

Houses are staying on the market longer; a stark contrast to the extreme sellers’ market of recent years. Homebuyers can say goodbye, at least for now, to the days of bidding wars and homes lasting just hours on the market. 

Take a look at homes that have been on the market for a while. Oftentimes when a house doesn’t sell, we think there’s something wrong with it. In today’s market, however, it might just mean the house was listed higher than it should be. In which case, sellers may be willing to accept an offer below the asking price. 

Negotiate

In a less competitive housing market, homebuyers are afforded more negotiating power. If a seller isn’t willing to budge on the price, see if they are willing to pay mortgage points to bring down those high rates a bit. 

“I’m seeing buyers usually asking for anywhere between two to three points from sellers. About 90% of our contracts are asking for rate buydowns,” Walker says. 

Pro Tip

If a seller isn’t willing to budge on the listing price, work with your agent to negotiate a potential buy down with mortgage points.