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🏠 5 Housing Markets to Watch (and Maybe Avoid) in 2025: Where Price Drops May Be Coming

The housing market in 2025 is anything but uniform. While national trends suggest modest price growth, some local markets are flashing warning signs of a potential downturn. These aren’t predictions of a nationwide collapse, but for some overheated metros, a significant correction could feel a lot like a crash, especially for recent buyers.

Whether you’re a homebuyer, investor, or seller, knowing where risks are concentrated is essential. Based on recent data from Cotality and insights from housing economists, here are the five riskiest U.S. housing markets in 2025.

Related: US Mortgage Rates Down Slightly Over Memorial Day Weekend May 26 2025 2025

📉 The Bigger Picture: Slowing Growth, Rising Risk

After years of breakneck price gains, the housing market is cooling. March 2025 saw pending home sales up 12% year-over-year, but price growth slowed to just 2.5%, a sharp contrast to the double-digit surges of 2021–2022.

While some regions—like parts of the Northeast—continue to post steady gains due to tight inventory, others are showing early signs of weakness. Notably, several once-booming metros now face a combination of affordability strain, rising inventory, and buyer pullback. That’s where things start to look shaky.

Related: The Top 10 Most and Least Affordable Housing Markets in the US in 2025

⚠️ The 5 Riskiest Housing Markets in 2025

These five metros are flagged as having a “very high risk of price decline” by analysts tracking over 100 U.S. cities.

1. Albuquerque, New Mexico

Albuquerque experienced steady price appreciation during the post-pandemic boom—but recent data shows momentum fading. The market has started to dip, with price growth flattening in early 2025.

Why it’s risky:

⚠️ Smaller market = higher volatility
⚠️ Recent price softness after years of gains
⚠️ Potential oversupply in a cooling demand environment

🚨 Watch for: Rising inventory and local job market shifts.

2. Atlanta, Georgia

Atlanta boomed in recent years, drawing in new residents with its affordability and job growth. But that growth may have reached its limits. Statewide price appreciation turned negative in March 2025 (-0.3%).

Why it’s risky:

⚠️ Sharp price run-up post-2020
⚠️ Increasing affordability constraints
⚠️ Inventory starting to catch up

🚨 Watch for: Flat or declining prices in key Atlanta suburbs and slowing inbound migration.

3. Winter Haven, Florida

A standout in Florida’s rapid ascent during the pandemic, Winter Haven now appears overextended. According to Cotality, it’s one of the top five most at-risk markets in the U.S.

Why it’s risky:

⚠️ Extreme price growth in 2021–2022
⚠️ Volatile price trends since 2023
⚠️ Florida-wide trend of rising inventory and softening demand

🚨 Watch for: Inventory surges and longer time-on-market metrics.

4. Tampa, Florida

Tampa’s housing market rode the wave of remote work, warm weather appeal, and strong inward migration. But prices peaked mid-2022 and are showing renewed downward pressure.

Why it’s risky:

⚠️ Major run-up in home values
⚠️ Affordability pressures mounting
⚠️ Market volatility and signs of a second decline wave

🚨 Watch for: Declining demand from out-of-state buyers and softening in new construction markets.

5. Tucson, Arizona

Tucson benefited from the Sun Belt boom, attracting remote workers and retirees seeking lower costs. But as prices spiked, affordability eroded, and demand has slowed.

Why it’s risky:

⚠️ Fast appreciation followed by a flat or downward trend
⚠️ Less resilient job market compared to nearby Phoenix
⚠️ Vulnerable to migration slowdowns and rising inventory

🚨 Watch for: Shifts in employment and new construction pipelines.

Related: Growing Housing Affordability Gap Creating Golden Opportunity for Investors

🧠 Why These Markets Are at Risk

Several overlapping factors are driving concern:

💰 Affordability Has Broken Down

Many of these markets saw home prices jump 70–90% since 2020—far outpacing income growth. That makes it harder for locals to buy, especially with mortgage rates now near 7%.

📦 Inventory Is Climbing

Builders raced to meet demand in 2021–2022, and now those homes are hitting the market just as buyer interest cools. Rising inventory + softening demand = downward pressure on prices.

💸 Rising Ownership Costs

Higher insurance premiums, property taxes, and maintenance costs (especially in Florida) are eating into buying power and pushing some potential buyers out of the market altogether.

😟 Economic Anxiety

Buyers are nervous. Concerns over inflation, job security, and high interest rates are making people think twice about making a big purchase—especially in overvalued markets.

Related: US Mortgage and Refinance Rates May 22nd 2025

🔍 What Does “Crash” Mean in 2025?

A full-blown 2008-style crash is unlikely. Lending standards have been tighter, and household balance sheets are stronger. But for local markets like these, a 10% – 20%+ drop from peak values is very possible—and that can be devastating for those who bought near the top with minimal equity.

Related: 10-Year US Interest Rate Forecast from the Experts

🧭 What Should Buyers, Sellers & Investors Do?

For Buyers:
✅ Don’t rush into these markets expecting appreciation.
✅ Focus on long-term value and avoid overpaying.
✅ Negotiate! You likely have more leverage now than in recent years.

For Sellers:
✅ Price realistically. Chasing 2022 highs is a losing strategy.
✅ Be prepared for longer selling timelines.
✅ Invest in staging and presentation—buyers are pickier now.

For Investors:
✅ Run conservative projections. Appreciation can’t be your only return strategy.
✅ Watch for shifting rental demand, especially if home prices are falling.
✅ Consider diversifying into more stable or undervalued markets.

Related: Dave Ramseys Predictions for US Mortgage Rates in 2025

⚠️ Bonus Watchlist: Other Markets With Red Flags

Beyond the top five, other metros showing signs of weakness include:

⚠️ Fort Myers, FL (–5.3% YoY)
⚠️ Punta Gorda, FL
⚠️ Sarasota, FL
⚠️ Victoria, TX
⚠️ Coeur d’Alene & Pocatello, ID

Each of these markets experienced pandemic-fueled booms and are now seeing negative annual price changes.

Related: Unlocking Value in the US Housing Market

✋ Final Thoughts: Awareness Over Alarm

These trends don’t mean you should avoid these markets entirely—but they do call for caution. Many of them soared to unsustainable price levels, and now the fundamentals are starting to catch up. Whether you’re buying a home to live in or investing, knowing where risks are rising gives you an edge.

If you’re considering one of these high-risk areas in 2025, take the time to:

✅ Study inventory and price trend data
✅ Get hyper-local insight from agents and analysts
✅ Weigh long-term ownership costs, not just sticker price

In today’s market, smart decisions are made at the local level—not based on national headlines.

FREE DOWNLOAD: 10 Costly Mistakes Foreigners Make Buying U.S. Real Estate