Forecasters Expect Flat Prices This Year, and Declines in Some Cities
Major research houses see national home prices roughly unchanged in 2026 before a modest rise next year, with one analysis identifying 22 metropolitan areas likely to see outright declines.
The consensus forecast for American home prices this year is the least dramatic one available: roughly flat, followed by an increase of about 3% in 2027.
Underneath that national average sits considerable dispersion. One widely circulated analysis identified 22 metropolitan areas likely to see prices decline outright, concentrated in the Sun Belt markets that built the most new housing and attracted the most pandemic-era migration.
Why the national number is so boring
Home prices are unusually resistant to declining in nominal terms. Sellers who cannot get their price generally withdraw the listing rather than accept less, which removes supply and supports the level.
That mechanism — sometimes described as downward stickiness — is why housing corrections typically show up first in transaction volume and only later, and partially, in price.
Volume has already collapsed. Existing-home sales have been running at levels comparable to the aftermath of the financial crisis, in a country with substantially more households than it had then.
The two-market divergence
Where prices are falling, the common features are recent construction and elevated carrying costs. Markets that permitted heavily in 2021 and 2022 delivered supply into a market with 6.7% mortgage rates, and several of them are also the markets where insurance costs have risen the most.
Where prices are holding or rising, supply is constrained by regulation and geography — the Northeast, the Midwest and coastal California — and there is simply nothing for buyers to switch to.
What would break the forecast
Two things, in opposite directions.
A meaningful decline in long-term interest rates would release a wave of demand from buyers who currently cannot qualify, and given how little inventory exists at the affordable end, that demand would show up in prices quickly.
A sustained deterioration in the labor market would do the reverse. Forced sellers are the only reliable source of price declines in housing, and forced selling requires job losses. Payrolls fell in July for the first time in more than two years, which is the data point housing economists are now watching most closely.
