A key indicator of core home prices is flashing a warning sign, suggesting that weakness in the regional housing market in the South and West is increasing.
In December, the national listing price per square foot fell 1.3% from a year ago to $220, marking the fourth consecutive month of annual declines, according to data from Realtor.com®’s monthly real estate report.
Price per square foot is important because it accounts for the sizes of homes on the market, while overall median prices can go up or down based on the share of listings that are condos or smaller homes.
In Realtor.com data going back to 2017, the square footage listing price never fell more than 1% year over year through December. Aside from the recent downturn, the number has only turned negative once in the past nine years, briefly dipping in the summer of 2023, when overall house prices also briefly turned negative.
Considering the recent decline, it is clear that the trend is more regional, with the decline in prices in the South and West mainly leading to the decline in the number of national issues.
In December, listing prices per square foot were down 2.4% year-over-year in the South and down 1.4% in the West, while up 1.8% in the Midwest and 4.4% in the Northeast.
“Especially in the South and West, I think the decline in listing price per square foot shows potential for improved affordability in 2026,” said the Realtor.com Senior Economist. Jake Krimmel. “Whether that will lead to lower retail prices remains to be seen.”
Regional disparities in price per square foot are more pronounced than for inventory, which has rebounded above pre-pandemic levels in the South and West but remains stagnant in the Northeast and Midwest.
Nationwide, the total number of homes sold in December remained 12.5% below the average seen from 2017 to 2019 levels.
However, inventory in the South (+4.5%) and West (+1.1%) actually increased from that pre-pandemic average, while the Midwest (-33.1%) and Northeast (-50.4%) continued to be in significant deficits.
As a result, home prices have so far remained strong in the Midwest and Northeast even in the slowest sales environment.
“The Northeast and Midwest are consistently cheaper in both the domestic and domestic segments,” Krimmel said. “And the price growth even in a high-quality area reflects that.”
Despite the recent decline, prices remain well above their pre-pandemic levels, even in the soft regions of the South and West.
Since December 2019, the average list price is up 33.4% nationally, and the price per square foot is up 47.9%.
This long-term increase has had a significant impact on purchases, even before adding the impact of higher mortgage rates.
Meanwhile, prospective homebuyers expecting a price correction so far have been disappointed, as home prices continue to rise by about 2% nationally through 2025, despite much lower purchase volume.
“I would say that one of the biggest mysteries of 2025 is why prices haven’t come down nationally despite the growing inventory and the growing time in the market,” Krimmel said.
The economist says that the most likely explanation is that retailers are still clinging too much to the high prices seen during the pandemic, perhaps with unrealistic expectations about the current state of consumer demand.
“Going into 2026 it’s possible that sellers are finally realizing that the market is moving in a direction that favors buyers, so asking prices should come down as a result,” Krimmel said.
