The U.S. housing market is expected to shift toward a more balanced state in 2026, offering potential relief for homebuyers after years of high prices and rising interest rates. A new forecast indicates that home prices will decrease in 22 of the nation's 100 largest metropolitan areas, while mortgage rates are projected to see a slight decline.
This change signals a move towards what experts describe as the "most balanced housing market" since before the pandemic. The adjustment is anticipated to create a more favorable environment for buyers who have been sidelined by affordability challenges, potentially increasing home sales for the first time after a period of stagnation.
Key Takeaways
- Home prices are projected to drop in 22 of the 100 largest U.S. cities in 2026.
- The largest price declines are expected in Florida and other parts of the Southeast and West.
- Average mortgage rates are forecast to dip to 6.3% in 2026, down from 6.6% in 2025.
- Existing-home sales are expected to rise by less than 2%, reaching 4.13 million properties.
- The market is predicted to become more "buyer-friendly," moving away from the strong seller's advantage seen in recent years.
A More Balanced Market on the Horizon
After a prolonged period where sellers held significant power, 2026 is shaping up to be a year of normalization for the U.S. real estate sector. According to an analysis from Realtor.com, the market will move in a more "buyer-friendly" direction, creating a landscape where neither party has a distinct upper hand in negotiations.
Jake Krimmel, a senior economist at Realtor.com, noted that the upcoming year will show signs of recovery. "2026 is going to be a year where we think the market is going to steady," Krimmel said. "It's going to show a lot of signs of getting back on track to what we consider to be normal."
This stabilization is driven by several factors, including a slight easing of mortgage rates and continued wage growth, which should improve affordability and encourage more prospective buyers to enter the market.
By the Numbers: 2026 Projections
- Average Mortgage Rate: 6.3%
- Projected Existing-Home Sales: 4.13 million
- Year-over-Year Sales Increase: Under 2%
- Cities with Price Drops: 22
Where Home Prices Are Expected to Fall
The forecast identifies 22 metropolitan areas where home prices are expected to decline. These cities are primarily located in the Southeast and the West, regions that experienced a significant surge in demand and price growth during the pandemic.
Florida, in particular, is set for a notable correction. Seven of the state's eight largest cities are projected to see price drops. The Cape Coral-Fort Lauderdale area is forecast to experience the most significant decline in the country, with prices expected to fall by 10.2%. The North Port-Sarasota-Bradenton region follows closely, with a projected decrease of 8.9%.
According to Krimmel, this cooling is a direct result of market dynamics returning to pre-pandemic norms.
"These places, among others, saw a huge frenzy during the pandemic, so part of what we are projecting is that demand continuing to come back down to earth," he explained.
The price adjustments are also linked to an expansion of housing inventory in these areas, which provides buyers with more options and reduces the competitive pressure that drove prices to record highs.
Cities with Projected Price Declines
While the full list includes 22 cities, the trend is concentrated in specific regions that saw intense market activity in recent years. The analysis considered factors like inventory levels, new construction, price growth, and local economic indicators such as wage and job growth to make these projections.
Why the Shift?
The anticipated price drops are not a sign of a market crash but rather a correction. The pandemic-era housing boom was fueled by historically low mortgage rates and a widespread shift to remote work, which allowed people to relocate. As mortgage rates have risen and companies have called employees back to the office, the intense demand in these "boomtowns" has started to wane, allowing supply to catch up.
Modest Gains and Cautious Optimism Elsewhere
While 22 cities are expecting price drops, the remaining 78 large metropolitan areas in the analysis are projected to see prices rise. However, these increases are expected to be modest.
The median price gain across these 78 locations is forecast to be 4%, a much more sustainable rate of growth compared to the double-digit percentage hikes seen in previous years. This suggests a broader trend of market stabilization across the country, not just in the areas expecting declines.
The slight dip in mortgage rates is a key component of this outlook. A projected average rate of 6.3% for 2026, down from 6.6% in 2025, will provide some relief to buyers' budgets. While still significantly higher than the sub-3% rates of the pandemic era, this small decrease, combined with rising wages, is expected to be enough to modestly boost purchasing power.
This improved affordability is predicted to have a small but positive impact on sales volume. Existing-home sales are projected to reach 4.13 million, a slight increase from the 4.07 million expected for 2025. While not a dramatic jump, it marks a reversal of the flat or declining transaction trends observed recently.
What This Means for Buyers and Sellers
For prospective homebuyers, 2026 could present the best opportunity in years. The combination of falling prices in some markets, more stable prices in others, increased inventory, and slightly lower borrowing costs creates a less frantic and more accessible environment.
Sellers, on the other hand, may need to adjust their expectations. The days of multiple offers significantly above the asking price are likely fading in many areas. Pricing a home correctly will become crucial, and sellers will likely have to engage in more traditional negotiations with buyers.
Overall, the forecast paints a picture of a market finding its footing. The extreme conditions of the past few years are giving way to a more predictable and balanced real estate landscape, which experts believe is a healthy development for the long-term stability of the U.S. housing market.
