Are home prices about to drop in 2025? 

The question on everyone’s mind right now: Are home prices about to drop? The short answer—probably not across the board, but some areas are seeing shifts that could work in favor of buyers.

At the national level, existing home sales dropped 4.9% in January, according to the National Association of Realtors (NAR). Despite this, sales are still 2% higher than last year, marking four months of consecutive annual growth.

The biggest challenge? Affordability. Home prices keep rising, with the median price now up 4.8% year over year to $396,900, and mortgage rates remain stubbornly high. A 30-year conforming loan sits at 7.03%, while FHA loans are at 6.64%, making homeownership difficult for many buyers.

Inventory is starting to shift, though. The number of unsold homes grew 16.8% year over year, and homes are staying on the market longer—averaging 41 days nationwide. More listings and longer selling times could ease price pressure in some areas, giving buyers more negotiating power.

How Is This Affecting Southwest Colorado?

In Southwest Colorado, more homes are available, giving buyers more choices. Active listings hit 814 in January, up 4.4% year over year. At the same time, homes are taking longer to sell, with an average of 162 days on the market, a 21.9% increase from last year.

Home prices depend on the area. Durango remains strong, up 12% to an average of $966,391. Pagosa Springs, however, has seen prices dip 7.2% to $584,460, reflecting softening demand. Bayfield remains stable with a 3.2% increase.

What This Means for Buyers and Sellers

For buyers, higher inventory and longer days on market create opportunities for negotiations, especially in cooling markets like Pagosa Springs. But mortgage rates above 7% are still a hurdle. If rates drop later in 2025, expect competition to pick up again.

For sellers, pricing correctly is key. Overpriced homes are sitting longer, especially in slower markets. In strong markets like Durango, demand remains steady, but sellers should still be prepared to negotiate.

Will Prices Drop?

A full market crash isn’t coming, but the rapid price growth of past years is slowing. Some overvalued markets may see minor price declines, but as soon as mortgage rates fall, buyers will likely return in force.

If you’re planning to buy or sell in Durango, Pagosa Springs, Bayfield, or anywhere in Southwest Colorado, now is the time to prepare. The market is shifting—make sure you’re in the best position to take advantage of it.

For further details on market trends and to explore opportunities in Southwest Colorado, feel free to contact me. Let’s navigate these changing times together and find the best deals tailored to your needs.

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