The U.S. housing market has been cooling down for the third consecutive year, with a significant decrease in sales volume. However, despite the decline in sales, housing prices have not experienced a major drop. In fact, prices continue to show a slight uptrend. Additionally, in some regions, prices have dropped by more than 20% compared to the peak during the pandemic.
So, is it the right time to buy a house at a discount? What are the risks and concerns involved? In this segment, we will delve into the topic of buying property at a discount. Furthermore, I believe there may be another surge in housing prices in the near future. What factors could potentially drive this upward trend? Keep reading for a detailed analysis and don’t miss out on this exciting content!
Up to this point, overall housing prices in the U.S. have not experienced a significant drop, but the rate of increase has slowed down considerably, with a notable divergence in prices across different regions.
According to various reports, while housing prices in the U.S. are still on the rise, the annual growth rate is at its lowest in nearly a decade. For instance, according to a report by Cotality, in May 2025, the national annual growth rate stood at only 1.8%, marking the lowest level since the winter of 2012, with a monthly growth rate of just 0.3%.
Data from the Federal Housing Finance Agency (FHFA) for the first quarter shows a 4.7% annual increase in housing prices nationwide, a slight decrease from the 5.5% in Q1 of the previous year but still showing an upward trend.
Predictions from real estate website Zillow also indicate a slowdown in housing price growth. Previous forecasts of a 2.9% increase have now been adjusted to 0.9%, with some even predicting a 1.7% decline from March 2025 to March 2026. In general, the market is not experiencing a widespread decline, but rather entering a phase of “mild increase or even localized decline,” returning to a more stable and less volatile state.
Let’s first take a look at which cities still show growth in housing prices. As of the first quarter of this year, Syracuse in New York State recorded a staggering 18% annual growth rate, the highest in the country. In terms of states, Connecticut and Rhode Island saw growth rates of 8.4%, with New Jersey close behind at 7.8%. The price increases are quite remarkable!
The reason Syracuse is experiencing such high growth is mainly because the local housing prices were originally low and the city was often considered undervalued. Therefore, during this period of high-interest rates and high housing prices, it has become a target for those seeking affordable and potentially appreciating investments. Additionally, starting in 2022, tech giants like Microsoft have announced plans to build data centers and chip factories in the surrounding areas of Syracuse, significantly driving the housing market.
Moving on to California’s housing market, in Northern California, prices are stabilizing with a slight increase, particularly in luxury homes. In San Francisco, luxury home prices have seen nearly a 4% annual growth rate in 2025, while prices for regular homes have remained relatively steady. The overall Bay Area market shows a slight uptick in buying and selling activity, with an increase in inventory and stable prices, allowing buyers some room for negotiation.
Moreover, the local easing of policies is alleviating the tense market situation and accelerating the supply. For example, in San Francisco, converting old offices into residential units through relaxed zoning regulations is expected to add over 60,000 housing units. Several cities in Northern California have also passed reforms to increase housing by allowing multi-unit construction, like in Berkeley’s plan to open up multi-unit buildings, increasing the supply.
Looking at Southern California, the overall trend is a slight decline. As of May 2025, the average home price in Southern California dipped slightly by 0.07% compared to the previous month, with a median price of around $876,044, marking a 0.2% decrease from the previous year. However, San Diego still shows local price increases in certain areas, with a 6.1% annual increase in median price in May, but simultaneously with a 70% increase in inventory, reducing market competition.
Given the increase in inventory and rising mortgage interest rates, inventory in Los Angeles County and Orange County has increased by over 30% from the previous year. With mortgage rates hovering around 6.7%, the appetite for homebuying continues to be suppressed.
Furthermore, due to the large fires in Los Angeles earlier this year, thousands of homes were destroyed, leading to a rapid decline in transactions in areas like Palisades, Altadena, Malibu, and Brentwood. The market is currently in a phase of post-disaster recovery and mid-market reorganization.
Data from Redfin and Zillow shows a significant rebound in transaction volume in the second quarter of 2025 compared to Q1, especially in areas that have been restored or were not affected by the disasters. Some buyers are taking advantage of the low prices, particularly investment buyers and foreign capital influx, focusing on unaffected areas or newly built properties after the fires. However, it is important to note that while local governments have cleared over 75% of the debris and expedited the process for fire victims to apply for building permits, the surge in reconstruction costs and fire insurance premiums, which can reach up to $20,000 – $40,000 annually, may affect the willingness of owner-occupiers to buy or rebuild.
Analyzing in depth, we move on to explore the cities that currently have the largest price declines and the reasons behind these decreases. Are these cities worth investing in or not? Let’s analyze the top five cities with the most significant price declines, most of which are popular amongst the Chinese community.
From 2022 to May 2025, the city with the largest decline is Austin, Texas, with a 22.1% drop and an annual decline of 3.6%. The significant decline in Austin can be attributed to four main factors: rapid price increases during the pandemic, with a 50% surge from 2020 to 2022, resulting in an excessively high base price.
The second-highest price decline is in Oakland, California, with a 20.3% drop from 2022 to May 2025. There are three primary reasons for the decline in Oakland: worsened security and homelessness issues, leading to decreased resident confidence and an increase in population outflow. Additionally, the dual impact of high prices and high interest rates, with the Bay Area already having high housing prices, naturally decreases purchasing power as rates rise. Lastly, remote work populations leaving the Bay Area, opting for lower-cost areas in the central and southern regions, have contributed to the upsurge in residents relocating.
Moving on to the third city with the largest decline, New Orleans in Louisiana saw an 18.1% drop. The reasons for the price reduction are threefold: increased insurance and natural disaster risks, leading to a surge in hurricane and flood insurance premiums, affecting homebuying intentions. Furthermore, population outflow and limited economic structure have suppressed housing prices due to prolonged economic downturn and declining population. Lastly, dwindling investment demands, particularly in short-term rental investments that were prevalent during the pandemic, have rapidly declined.
In terms of timing the market in New Orleans, the risk remains high currently, with hurricane risks and several insurance companies exiting the Louisiana market. The lack of job markets has also limited rental growth. However, if potential buyers can find central areas with price drops of 25-30% or more, and are familiar with local regulations, have resources to operate short-term rentals responsibly, and can cover insurance and operating costs, then investing in properties in tourist hotspots might be profitable.
San Francisco, a household name, experienced a 15.3% price decline, primarily due to the tech industry transitioning from a period of immense wealth accumulation to a downturn. Layoffs coupled with stock market volatility have led to the disappearance of the wealth effect. Furthermore, an increase in out-migration and the high cost of living, combined with remote work, has led residents to move to more affordable areas. Lastly, the high vacancy rates in commercial areas and downtown decline have curtailed overall housing prices and confidence, prompting efforts to revitalize vacant office spaces in San Francisco to alleviate the housing crisis.
In prime areas like Marina or Noe Valley, if prices further correct, seizing the opportunity might be wise. However, investment returns on apartments in San Francisco are lower, mandating close attention to property taxes, HOA fees, and tenant issues. For potential homeowners, it could be a good time to move in, especially with larger price drops in neighborhoods like SOMA or downtown, thereby expanding bargaining leverage for buyers. Furthermore, you need to consider the unresolved safety issues and homelessness problems in the city center, requiring careful selection of areas like Noe Valley, Inner Sunset, and Marina.
The fifth city with the largest price decline, Washington DC, registered a 10.8% drop, reaching double-digit figures. Similarly affected by remote work trends, the slow return of residents and the surrounding housing values have taken a hit. Additionally, with already high housing prices and the impact of high-interest rates, purchasing power has significantly decreased.
While DC retains a stable government job market, the post-pandemic exodus of high-income groups from the city has slowed down the return of residents. Furthermore, with a significant reduction in local home-buying demand due to federal layoffs and an influx of housing inventory, prices have naturally fallen.
Despite short-term pressures due to federal layoffs, suburban areas like Arlington, Silver Spring, or Alexandria could present a rebound opportunity if prices stabilize. It’s suitable for patient investors to enter the market, but arbitrage in the short term might not be advisable.
For those looking to buy investment properties in DC, it is crucial to be aware of the strict tenant protection regulations that prevent arbitrary evictions and cap rent increases. Additionally, DC reassesses property values annually, resulting in unstable property tax bases. With government layoffs and budget constraints, temporary tax changes or policy restrictions may arise.
Finally, let’s delve into the interest rate aspect. Currently, U.S. President Trump and Federal Reserve Chair Powell are at odds over the issue of rate cuts. While Trump believes the U.S. economy requires prompt interest rate cuts, Powell argues that inflation still exists, and fears that tariff factors could lead to inflation spikes. Moreover, given the unusual resilience of the U.S. economy, these signals have led him to persist in not reducing rates.
Recently, U.S. Treasury Secretary Scott Bessent criticized the Federal Reserve for having “tariff phobia,” asserting that the Fed would surely cut rates in September no matter what. Even when inflation was higher last year, they cut by 50 basis points, but now with lower inflation, rates have not been cut. Additionally, Trump has indicated that he will appoint a new chairman willing to significantly reduce rates and lower them to 1%!
Knowing Trump’s history of following through on his promises, if the Fed does indeed initiate rate cuts in September and goes all the way down to 1%, what chain reactions might occur? Of course, home loan rates would see a significant decrease, unlocking the rate lock effect of the past three years, enabling potential buyers and sellers to re-enter the market. This may lead to a surge in transactions that have been stagnant for a long time, similar to the retaliatory buying that followed the pandemic.
Many homeowners looking to upgrade might no longer have to worry about high interest rates and be willing to sell their properties. Although housing prices may rise again, the lowered rates would significantly boost purchasing power for buyers.
If we anticipate a rate cut in the short term and subsequently a cooling of mortgage interest rates, perhaps buyers could make their move now. Even though rates are currently high, housing prices are in a phase of correction and gentle growth, providing buyers with more room for negotiation. So, when rates eventually drop and refinancing is an option to secure lower rates, it could be a profitable move.
If we wait until rates drop again to make a purchase, housing prices may skyrocket once more, leading to competitive bidding among buyers, potentially missing the prime opportunity to buy low.
This is just a simple speculation as market conditions are constantly changing, personal financial strength, and fund utilization vary among individuals. It is essential to evaluate and make personalized decisions based on individual circumstances. ◇