20 Cities Where Home Prices Are Expected To Crash in the Next 12 Months

Zillow forecasts a modest 1.0% nationwide housing correction over the next 12 months, but anticipates significant localized price declines, with some small markets like Greenville, MS projected to fall by over 16% and major metros such as New Orleans by over 7%. This regional downturn is driven by sustained high interest rates increasing inventory, pandemic-era overvaluation, speculative investment, new construction outpacing absorption, and escalating insurance costs, particularly in flood-prone Sun Belt and Gulf Coast regions. The resulting supply surge indicates a challenging market for sellers but potential opportunities for buyers in these specific areas.

Analysis

Zillow forecasts a modest 1.0% nationwide housing price correction over the next year, which belies significant, geographically concentrated downturns. The most severe declines are projected in smaller Sun Belt and Gulf Coast markets, with cities like Greenville, Mississippi facing a potential 16.7% drop. Major metropolitan areas are not immune, as New Orleans (-7.2%), San Francisco (-6.1%), and Austin (-5.1%) are also expected to see material price reductions. This correction is driven by a confluence of factors, primarily sustained high interest rates that are compelling reluctant homeowners to sell, leading to a substantial supply increase, as evidenced by a 24.8% year-over-year jump in housing inventory reported by Realtor.com. This supply glut is exacerbating localized issues stemming from pandemic-era overvaluation, speculative investment, and excess new construction. Furthermore, rising insurance costs, particularly linked to increasing flood risk in coastal and inland regions, are emerging as a significant structural headwind depressing property values in affected areas.

Key Decisions for Investors

• Investors with direct residential real estate holdings or exposure through mortgage-backed securities in the 20 specified cities should re-evaluate their positions for heightened depreciation risk, particularly in Sun Belt markets projecting double-digit declines.
• The 24.8% surge in housing inventory, coupled with falling prices, signals potential headwinds for homebuilder stocks and single-family rental REITs that have a high operational concentration in the listed metropolitan areas like Austin, San Antonio, and Denver.
• The identified trend of soaring insurance costs tied to climate risk in the Gulf Coast and other flood-prone regions should be modeled as a long-term valuation depressant for real estate assets, meriting an increased risk premium for investments in these geographies.