Several markets in the South that entered a boom period during the COVID-19 pandemic are now facing a market correction as home prices continue to normalize.
According to Kotality’s report, U.S. home prices experienced minimal annual growth from December 2024 to December 2025, with national home price increases of just 0.9%. This is one of the slowest growth rates to hit the country since its recovery from the Great Recession.
While some markets, concentrated in the Midwest, experienced solid price increases during this period, the situation in some markets in the South, particularly Florida and Texas, was even worse.
“This is a significant departure from the sharp rise of recent years. While upward price pressures remain, they have eased sufficiently to suggest that the market is finally becoming easier to navigate for prospective buyers,” Dr. Thelma Hepp, Kotality’s chief economist, said in the firm’s report.
The slowest home price growth was in Kahului-Wailuku, Hawaii, where price growth slowed to -8%. Victoria, Texas (-7.4%); Wichita Falls, Texas (-7.2%). Napa, California (-7.1%); Naples, Florida (-6.8%) is in the top five coolest markets in Kotality’s report.
Additionally, four markets in Florida and one market in Georgia rounded out the top 10 coolest markets.
Home price indexes also declined in Colorado, the District of Columbia, Arizona, Utah, and Oregon.
Many of the currently cooling markets are places where demand surged during the coronavirus pandemic as home prices soared. Now they are experiencing a market correction.
Kotality’s report said that while changes in house prices suggest the market is normalizing, the decline in metros is slowing house price growth and suggests it may level off. As of December, 49 of the top 100 metro areas had slower home price growth compared to 77 of the 100 metro areas at the beginning of the fall.
The hottest markets included Youngstown, Ohio, where home price growth was 15.9% year over year. In Terre Haute, Indiana, price growth increased 11.4% year over year. Decatur, Illinois saw a 10.5% year-over-year increase.
How labor market factors change in the coming months will also influence how homebuyers react to changes in home prices.
“The market trajectory into 2026 will largely depend on wage growth and how quickly buyers regain the purchasing power needed to meet sellers’ price standards,” Dr. Hepp said. “For now, Kotality data shows that the housing landscape is still gaining its footing, but is finally stabilizing after a long period of imbalance.”
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