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The market is giving back some post-pandemic gains

By Mark Huffman of ConsumerAffairs

• More than half of U.S. homes lost value over the past year, the highest rate of depreciation since 2012.

• The decline in home values is especially pronounced in many Sun Belt and West Coast metro areas where rapid growth during the pandemic is now unwinding.

• For potential buyers, 2025 is shaping up as a buyers market in many places, as elevated mortgage rates and growing inventory tilt leverage back toward purchasers.

Declining home affordability has usually been blamed on mortgage rates, but inflated home prices that surged during the COVID-19 pandemic are actually to blame. Todays mortgage rates are historically normal home prices are not.

But that may be changing. After years of historic growth fueled by pandemic-era demand, 2025 is seeing a broad correction in U.S. home values. While national indexes still show modest overall gains, the gains have flattened dramatically and in dozens of metro areas, home prices have actually fallen.

According to a recent analysis by real estate platform Zillow, 105 of the 300 largest U.S. metro areas reported year-over-year declines in home values during the 12 months leading into late 2025. In many of these places once the hottest hot-markets inventory has risen, demand has cooled, and buyers now have significantly more negotiating power.

Where prices are dropping most

Some of the hardest-hit markets include:

• Austin, Texas Once emblematic of booming Sun Belt growth, Austin has seen home values slide by several percentage points.

• Tampa, Florida Among the steepest declines in the country, reflecting a retreat in demand and rising supply of homes.

• Miami, Florida Once red-hot, Miamis housing values have slipped as mortgage rates climb and buyers retreat from previously overheated markets.

• Other notable markets with declines include Dallas, Texas, Phoenix, Arizona, Orlando, Florida, and Jacksonville, Florida.

Overall, many of the largest drops are in Sun Belt and West Coast areas places that saw dramatic gains earlier in the decade.

Whats driving the decline

Several broad trends are combining to push home values downward in many markets:

• Higher mortgage rates Rates remain elevated compared with the pandemic lows, which suppresses buyer affordability and weakens demand.

• Rising inventory and easing demand After a period of tight supply, more homes have been listed, giving buyers more choices and shifting leverage away from sellers.

• Market correction after a boom Many of the markets seeing the steepest declines were big winners during the housing boom. As growth settles, price adjustments follow.

• Economic uncertainty Broader concerns about inflation, interest rates, and job stability have made many potential buyers more cautious, reducing the pool of active purchasers.

What it means for buyers, sellers and homeowners

For buyers: 2025 presents opportunities. Buyers who were previously priced out might find more negotiable sellers, especially in Sun Belt or West Coast metros where values are falling.

For sellers: It may be a tougher market some may need to adjust expectations or offer incentives to attract buyers. Homes that remain on the market may sit longer than in recent years.

For homeowners who bought earlier (pre-2023), many still retain significant equity. Even where home values have dropped, most residences remain well above pre-boom valuations meaning that while prices are falling, many homeowners are not underwater.

That said, the shifting dynamics reinforce the need for buyers and sellers to pay close attention to local conditions not just national headlines especially as mortgage rates, supply, and demand continue to evolve.

People express slightly more confidence in the future

By Mark Huffman of ConsumerAffairs

• The headline University of Michigan (UM) consumer sentiment index ticked up to 53.3 in early December 2025, from 51.0 in November.

• Inflation expectations among households fell: the expected rate over the next year dropped to 4.1%, down from 4.5% in November, while long-term inflation expectations eased to 3.2%.

• The modest improvement the first in five months was driven by greater optimism about personal finances and future prospects, even as many Americans continued to express concern over prices and labor-market uncertainty.

The University of Michigan preliminary reading for its monthly consumer-sentiment survey shows a moderate rebound after months of decline. The index rose modestly to 53.3 a gain of 2.3 points over Novembers reading.

Although that uptick beat economists forecasts, the broader context remains sobering. The index remains far below the roughly 71.7 level seen in January, and economic optimism is still a long way from pre-pandemic norms.

Survey respondents reported little change in how they view current economic conditions. However, their expectations for the future personal finances and the economy at large improved. That optimism helped lift the overall index.

Whats behind the shift?

• Better outlook on personal finances. According to the survey, perceived financial prospects rose sharply a 13 % increase in those expecting their personal finances to improve over the coming year. This was reflected across different ages, income levels, education backgrounds and political affiliations.

• Slowing inflation expectations. Short-term inflation expectations dropped to 4.1% (from 4.5%), the lowest reading since January 2025. Long-term inflation expectations also softened to 3.2%. For many households, that represents a glimmer of relief that prices may stabilize somewhat.

But headwinds remain strong

• High prices still weigh heavily. Despite some easing in inflation expectations, many consumers still cited high prices as a key concern undercutting their sense of financial security.

• Labor-market worries and economic uncertainty persist. Even though labor-market expectations improved slightly, they remain subdued compared with historical norms, reflecting broader pessimism around job security and economic growth.

• Confidence still far below pre-year levels. At 53.3, the index is far below the level at the start of the year underscoring that many households remain fragile and cautious about spending.

Why these numbers matter

The consumer-sentiment index by the University of Michigan is widely watched because it offers a window into what households are likely to do next spend more, save, or hold back. Consumer spending drives a large portion of U.S. economic activity, so shifts in confidence can ripple out to influence growth, inflation, and even interest-rate decisions by policymakers.

The slight rebound this month may offer modest encouragement: if more people feel confident about their finances and inflation is expected to ease, that could translate into increased spending over the holidays supporting retailers and service industries.

But the underlying mood remains cautious. For many Americans, especially those facing price pressures or employment uncertainty, spending may stay subdued potentially slowing economic momentum heading into 2026.

What consumers should do

• Revisit budgets and spending plans. With inflation still above historic norms, households may benefit from carefully reviewing discretionary spending, noting whats essential and what can wait.

• Shop around for deals especially on big-ticket items. If many consumers remain cautious, retailers might offer discounts or promotions to stimulate demand.

• Keep an eye on inflation and labor-market trends. Continued easing of price expectations could improve household budgets, but if inflation or job insecurity flares up, that may dampen any spending recovery.

• Use confidence data as a reminder to build or maintain emergency savings. With economic uncertainty still present, having a buffer even a modest one can help households weather unexpected costs or job changes.