5 Cities Where Home Prices Are Predicted To Crash in 2025

Are you thinking about buying a home? Or maybe you're already a homeowner, keeping a close eye on the market? Either way, you've probably wondered if home prices are going to keep climbing, or if a dip is on the horizon. While most experts predict modest growth nationally in 2025, a recent CoreLogic report has identified five cities where home prices are predicted to crash within the next 12 months. The cities at the greatest risk of declining home prices are: Provo, UT; Tucson, AZ; Albuquerque, NM; Phoenix; and West Palm Beach, FL.

These cities are facing a greater than 70% probability of home price decline. Let's dive into why these particular areas are considered high-risk and what factors are contributing to this forecast.

5 Cities Where Home Prices Are Predicted To Crash

Why Should You Care About This Prediction?

Okay, so some expert somewhere thinks prices might go down in a few places. Why should you even care? Well, for a few reasons:

• If you're looking to buy: This information could help you decide where to focus your search or when to make an offer. Timing can be everything!
• If you already own a home: Knowing if your area is at risk can help you make informed decisions about refinancing, selling, or simply adjusting your financial expectations.
• Even if you're not in the market: Understanding these trends can give you a broader picture of the national housing market and the economic factors that influence it.

The CoreLogic Report: A Deep Dive

CoreLogic, a reputable real estate analytics firm, isn't just pulling these predictions out of thin air. Their Market Risk Indicator report takes into account a bunch of different factors, including:

• Economic Conditions: Things like job growth, unemployment rates, and overall economic stability in each area.
• Housing Supply: How many homes are on the market? Are there more buyers than sellers (a seller's market) or vice versa (a buyer's market)?
• Demand Dynamics: What's driving people to buy or rent in these areas? Are there factors that could cause demand to cool off?

By analyzing this data, CoreLogic assigns a probability of price decline to different metro areas. A 70% or greater probability, as seen in these five cities, is considered a high-risk scenario.

The Sun Belt Story: Boom and (Possible) Bust?

It's no accident that all five of these cities are in the Sun Belt. The Sun Belt saw huge price growth during the pandemic. People were moving to these areas for warmer weather, lower taxes, and more space. This boom pushed home prices way up. But, like all booms, this one might be running out of steam.

Here is a table view of the image attached in the prompt:

Risk Rank	Metropolitan Areas	Level of Risk of Price Decline	Confidence Score
1	Provo-Orem, UT	VERY HIGH ABOVE 70% PROBABILITY OF A PRICE DECLINE	50-75%
2	Tucson, AZ	VERY HIGH ABOVE 70% PROBABILITY OF A PRICE DECLINE	50-75%
3	Albuquerque, NM	VERY HIGH ABOVE 70% PROBABILITY OF A PRICE DECLINE	50-75%
4	Phoenix-Mesa-Scottsdale, AZ	VERY HIGH ABOVE 70% PROBABILITY OF A PRICE DECLINE	50-75%
5	West Palm Beach-Boca Raton-Delray Beach, FL	VERY HIGH ABOVE 70% PROBABILITY OF A PRICE DECLINE	50-75%

Here's why the Sun Belt might be cooling off:

• Higher Interest Rates: As the Federal Reserve has raised interest rates to combat inflation, mortgages have become more expensive. This makes it harder for people to afford homes, reducing demand.
• Increased Inventory: During the boom, builders were scrambling to keep up with demand. Now, there are more homes on the market in some Sun Belt cities, giving buyers more options and potentially driving prices down.
• Affordability Concerns: Even with potential price declines, some Sun Belt markets remain expensive relative to local incomes. This can deter potential buyers and slow down the market.

A Closer Look at the 5 Cities:

Let's take a closer look at each of the five cities identified by CoreLogic:

1. Provo-Orem, UT: This area saw significant price increases during the pandemic, but things are starting to shift. According to Realtor.com, the median list price in Provo last month was $566,375, down 1.4% from a year ago. Even so, it's still up a whopping 38% from January 2020. This suggests that the market may be correcting after a period of unsustainable growth. High growth leads to high declines!
2. Tucson, AZ: Tucson is another market that experienced rapid price appreciation. List prices in January were down almost 2% from the previous year.
3. Albuquerque, NM: This city has seen similar trends to Provo and Tucson. While still relatively affordable compared to other Sun Belt markets, Albuquerque's housing market is showing signs of slowing down. I have also noticed that in the desert regions like Albuquerque, the lack of rains can make it extremely difficult to do construction in time and within budget leading to inventory problems.
4. Phoenix-Mesa-Scottsdale, AZ: Phoenix was one of the hottest housing markets in the country during the pandemic. However, it's now facing a significant correction. Increased inventory and cooling demand are putting downward pressure on prices.
5. West Palm Beach-Boca Raton-Delray Beach, FL: South Florida saw a huge influx of people during the pandemic, driving up prices. But the area is also vulnerable to rising insurance costs and other factors that could dampen demand. List prices were down a notable 10% from a year earlier in Palm Beach County, indicating a significant shift in the market.

National Trends vs. Local Realities:

While these five cities are considered high-risk, it's important to remember that the national housing market is expected to see modest growth overall. CoreLogic projects that national home prices will increase by 4.1% annually through December 2025. Realtor.com is projecting similar growth of about 3.7% through 2025.

• Why the difference? The housing market is hyperlocal. What's happening in one city or region might be completely different from what's happening elsewhere.
• Mortgage Rates are Key: High mortgage rates are still a major factor weighing on the market. As long as rates remain elevated, buyer demand will likely remain subdued.
• Inventory Levels Matter: The amount of homes for sale will also play a big role. If inventory continues to increase, prices could face downward pressure.

What Does This Mean for You?

So, you've read all this information – now what do you do with it? Here are some things to consider, depending on your situation:

• Potential Buyers: If you're looking to buy in one of these five cities, now might be a good time to start shopping around. You might have more negotiating power as prices potentially decline. But, don't try to time the market perfectly. Instead, focus on finding a home that meets your needs and fits your budget.
• Current Homeowners: If you own a home in one of these areas, don't panic! A price decline doesn't necessarily mean you'll lose money. Focus on the long term. If you're planning to sell in the near future, it might be worth considering listing your home sooner rather than later. However, the real estate market is very difficult to predict.
• Everyone Else: Even if you're not directly affected by these trends, it's good to stay informed about the broader housing market. This knowledge can help you make better financial decisions in the future.

The Role of Economic Experts

Experts like Selma Hepp, Chief Economist at CoreLogic, play a vital role in helping us understand the housing market. Hepp points out that the market has been “bifurcated,” with Northeastern markets seeing price growth due to low inventory, while Southern markets are adjusting to higher inventory and rising costs.

Other economists, like Thomas Ryan of Capital Economics, believe that mortgage rates will likely remain near 7% this year before potentially declining in 2026. This suggests that the housing market will continue to be influenced by interest rate pressures in the near term.

The Future Outlook

While the CoreLogic report highlights the risk of price declines in certain cities, the overall outlook for the national housing market is still relatively positive. Most experts believe that home prices will continue to grow, albeit at a slower pace than in recent years.

Here are some key factors to watch:

• Mortgage Rates: Any significant changes in mortgage rates will have a major impact on the market.
• Inflation: How effectively the Federal Reserve combats inflation will influence interest rates and overall economic conditions.
• Housing Supply: The level of new construction and existing homes for sale will determine how much competition buyers face.

Final Thoughts: Be Informed, Be Prepared

The housing market is always changing. There are ups and downs, booms and busts. The key is to stay informed, understand the trends, and make decisions that are right for you.

Whether you're buying, selling, or just watching from the sidelines, I hope this article has given you a better understanding of the factors that influence home prices and the potential risks and opportunities that lie ahead.