What happened

The housing market might be sputtering, so investors are becoming worried about the prospects of online real estate company Zillow Group (Z -1.51%) (ZG -1.64%). As a result, both classes of the company's stock fell by almost 15% in price over the course of this trading week, per data compiled by S&P Global Market Intelligence.

So what

Zillow publishes regular U.S. housing market updates, and the most recent one (published Thursday morning) wasn't encouraging. The company's Zillow Home Value Index showed that in July, American home values slipped marginally by 0.1% compared to June.

Now while this wasn't exactly a rush-for-the-exits decline, it was the first fall in the company's metric since 2012. It also represents quite a slowdown from the hot growth in real estate prices of the last two years.

Most of the 50 largest metro areas included in the index saw month-over-month declines. The most dramatic of these was San Jose, California (the largest city in Silicon Valley), where home values fell by 4.5%. Nearby San Francisco was the third-steepest decliner over the period, dropping by almost 3%. Other tumbling municipalities include Las Vegas (down 1.4%), Boston (0.7%), and Los Angeles (0.3%).

On the other hand, a clutch of big cities eked out gains, notably New York (up 0.3%) and the Miami-Fort Lauderdale cluster (1.5%).

Now what

Slipping home prices might give some hope to potential buyers, but the market softness they imply is understandably worrying to investors in real estate companies. If anything, those folks are probably concerned that the combination of higher interest rates and a possibly stalling economy will keep that downward trend in force. If that comes to pass, we can expect more pain for Zillow stock and its peers.