Several Southern markets that entered a boom phase during the COVID-19 pandemic are facing a market correction now as home prices continue to normalize.
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Home prices in the U.S. saw minimal annual growth between December 2024 and December 2025, with national home prices rising by just 0.9 percent, according to a report from Cotality. That’s one of the softest growth rates to hit the country since the Great Recession recovery.
Some select markets concentrated in the Midwest saw healthy price growth during this period, but several markets in the South, particularly in Florida and Texas, fared much more poorly.
“We are seeing a significant departure from the rapid surges of recent years; while the upward pressure on prices remains, the momentum has moderated enough to suggest that the market is finally becoming more navigable for prospective buyers,” Cotality Chief Economist Dr. Selma Hepp said in the company’s report.
Home price growth is at its worst in Kahului-Wailuku, Hawaii, where price appreciation slowed to -8 percent. Victoria, Texas (-7.4 percent); Wichita Falls, Texas (-7.2 percent); Napa, California (-7.1 percent); and Naples, Florida (-6.8 percent) all rounded out the top five coolest markets in Cotality’s report.
Four more markets in Florida and one market in Georgia filled out the top 10 coolest markets.
Areas of Colorado, the District of Columbia, Arizona, Utah and Oregon also saw declines in their home price indexes.
Many of the markets that are cooling now are places that saw a surge in demand during the COVID-19 pandemic, along with soaring home prices. Now they’re experiencing a market correction.
The shift in home prices signals a normalization of the market, Cotality’s report said, while also signaling a potential leveling off as fewer metros show home price growth slowing. As of December, 49 out of the 100 top metro areas saw home price growth slow compared to 77 out of 100 metros earlier in the fall.
The hottest markets included Youngstown, Ohio, where home price growth was up 15.9 percent year over year; Terre Haute, Indiana, where price growth was up 11.4 percent year over year; and Decatur, Illinois, where it was up 10.5 percent year over year.
How factors in the labor market change in the coming months will also play a role in how homebuyers respond to shifting home prices.
“As we move through 2026, the market’s trajectory will depend heavily on wage growth and how soon buyers regain the purchasing power needed to meet sellers’ pricing thresholds,” Dr. Hepp said. “For now, Cotality data shows a housing landscape is still finding its footing, but it is ultimately stabilizing after an extended period of imbalance.”
Email Lillian Dickerson
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