The 2025 Housing Market: Tale of Two Americas Emerging Across U.S. States

America’s real estate landscape has become starkly divided. While some regions post impressive gains, others face headwinds that suggest caution for prospective buyers. Understanding this divergence—powered by Zillow’s latest October 2025 data—reveals crucial insights about where opportunities exist and where market momentum is slowing.

Market Momentum and the Winners

The strongest performers tell a compelling story. New Jersey leads with an 11.7% appreciation over two years, while New York follows closely at 11.6%. In the Northeast, Connecticut has climbed 11.0% over the same period, demonstrating robust demand in established markets.

The California housing market and broader Western markets paint a different picture. California sits at $784,364 average home value with modest 1.8% two-year growth, while Texas retreated by 2.7% over two years. Arizona and Colorado both experienced negative momentum, declining 2.0% and 1.3% respectively across two years.

Meanwhile, emerging strength appears in the Midwest and Southeast. Illinois jumped 4.3% year-over-year—the highest annual gain—benefiting from its central location and economic fundamentals. Indiana, Iowa, Kansas, and Kentucky all posted two-year gains exceeding 7.4%, signaling steady appreciation in these traditionally affordable regions.

Geographic Price Variations

Hawaii commands premium pricing at $959,688 per home, a reality shaped by its limited inventory and destination appeal. On the opposite end, Mississippi offers the lowest average home values at $185,741, with West Virginia following at $169,206—both presenting opportunities for value-conscious buyers.

Mid-tier markets show diverse trajectories. Colorado at $549,087 and Utah at $540,574 reflect Western desirability but face recent headwinds. The Northeast remains priced higher: Massachusetts averages $667,117 with solid 7.1% two-year growth, while New Jersey at $578,764 combines premium pricing with exceptional appreciation.

States Flattening or Declining

Not all markets are thriving. Florida, despite its popularity, retreated 5.0% year-over-year and 4.4% over two years—a significant reversal for a traditional migration destination. Texas similarly disappointed with -2.6% annual decline, Oregon remained flat at 0.4% two-year growth, and several Southwestern states stalled or declined.

Louisiana, though affordable at $208,936, showed marginal losses of 2.0% over two years. Hawaii’s vaunted premium status hasn’t prevented a -2.1% annual decline, suggesting even prestigious markets face affordability pressures.

The Underlying Pattern

Analysis of Zillow’s comprehensive data (October 2023 through October 2025) reveals that traditional affordable states—particularly in the South and Midwest—are emerging as appreciating assets. Conversely, Western boom markets and Florida have begun retreating after years of explosive growth. This inversion suggests buyers should recalibrate assumptions about where value emerges in 2026.

The housing market data underscores a fundamental shift: pandemic-era migration patterns are reversing, supply-demand dynamics are rebalancing, and regional economic factors increasingly determine outcomes rather than national trends.

Key Takeaways by Region

Top Performers: New Jersey (11.7%), New York (11.6%), Connecticut (11.0%), Illinois (4.3% annually)

Affordability Leaders with Growth: Indiana, Iowa, Kansas, Kentucky—all showing 7%+ two-year appreciation with home values under $270,000

Caution Zones: Florida, Texas, Arizona, Colorado—negative or minimal recent momentum despite historical popularity

Premium Markets Holding Ground: Massachusetts, Washington, and Utah maintain strength, though with varied trajectories

For 2026 homebuyers, the data suggests looking beyond traditional hotspots toward secondary markets with demographic tailwinds and appreciating valuations—particularly in the Heartland and Southeast where supply and demand remain better balanced.

Data Source: Zillow Single-Family Residence (SFR) valuations collected December 9, 2025, analyzing two-year appreciation (October 2023 to October 2025), one-year changes (October 2024 to October 2025), and six-month trends (April 2025 to October 2025) across all 50 states.