The U.S. housing market, while still facing high home prices and mortgage rates well above 6%, is expected to experience significant shifts in 2026. A new analysis from Realtor.com reveals that home prices are forecasted to decrease in 22 of the largest 100 cities, bringing potential relief to buyers after years of a competitive and expensive market. Additionally, mortgage rates are projected to ease slightly, offering more affordability for prospective homebuyers.
A Shift Toward a Balanced Housing Market in 2026
The real estate market in 2026 is predicted to become more “buyer-friendly,” marking the most balanced market since the pandemic, according to Jake Krimmel, a senior economist at Realtor.com. This means that neither sellers nor buyers will hold the upper hand, creating a more stable environment for negotiations. The forecast suggests that buyers will have more room to make decisions without the pressure of inflated prices and competition.
Mortgage rates are expected to dip to an average of 6.3% in 2026, slightly lower than the 6.6% rate expected for 2025. Though the decrease is modest, it could have a notable impact on affordability. As borrowing costs go down, more buyers are likely to re-enter the market, especially considering the expected wage growth in 2026. This combination of factors is expected to help the housing market steady and move closer to what is considered “normal.”
“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.”
Projected Price Declines in 22 Major U.S. Cities
Realtor.com’s analysis forecasts that home prices will drop in 22 of the largest 100 U.S. cities, most of which are located in the Southeast and West regions. These cities, which saw rapid price increases during the pandemic, are expected to experience price stabilization as inventory rises and demand softens from the frenzied housing market conditions of previous years.
For example, the Cape Coral-Fort Lauderdale metro area in Florida is predicted to see the largest price drop, with homes expected to fall by 10.2%. The North Port-Sarasota-Bradenton region in Florida follows closely behind with an 8.9% drop. Other areas in the Southeast, such as parts of Arizona and Nevada, are also expected to experience price declines.
Krimmel attributes these price drops to the increase in housing inventory, which provides more choices for buyers. Many of these cities had experienced extreme demand during the pandemic, particularly in areas popular for relocation and remote work. However, as mortgage rates remained high in 2025 and demand returns to more typical levels, these areas are seeing price corrections.
Rising Inventory and Changing Market Conditions
The increasing inventory in these cities is a critical factor contributing to the projected price declines. During the pandemic, many of the areas seeing the biggest price drops experienced a housing frenzy due to low mortgage rates and a surge in remote work. However, with mortgage rates remaining elevated, the market has cooled, leading to a rise in available homes.
More inventory means more options for buyers, which helps to lower competition and stabilize prices. The days of bidding wars and skyrocketing prices in many parts of the country may soon be behind us, as the market becomes more balanced. While the inventory increase won’t necessarily lead to dramatic price drops everywhere, it will offer prospective buyers a better chance to purchase homes without being priced out of the market.
Sales Forecast: A Modest Increase in 2026
Existing-home sales in 2026 are expected to rise slightly to 4.13 million homes, according to Realtor.com’s projections. This represents a modest increase from the projected 4.07 million homes in 2025. The slight rise in sales reflects a return to a more typical housing market after the tumultuous effects of the pandemic, where sales were limited by high prices and rising mortgage rates.
While this increase in sales may not be large, it signals a healthier, more balanced housing market. Buyers, especially those who have been waiting for the right opportunity, may find that 2026 offers a better environment to purchase a home with fewer barriers.
Key Cities Seeing Price Drops
Florida dominates the list of cities expected to see the largest price drops, but other parts of the Southeast and West are also projected to experience declines. As mentioned earlier, Cape Coral-Fort Lauderdale and North Port-Sarasota-Bradenton are expected to be the hardest-hit areas in terms of price drops. In total, Realtor.com identified 22 major U.S. cities where prices are forecast to fall, and most of these cities had seen inflated prices during the pandemic.
Other regions, particularly in the Northeast and Midwest, are less likely to experience large price declines. Cities in these regions have generally seen more moderate price growth compared to the explosive increases seen in the South and West.
The Outlook for the Housing Market in 2026
The housing market in 2026 is expected to be more stable and balanced, with home prices declining in some of the country’s hottest markets and mortgage rates easing slightly. While affordability challenges remain, the overall outlook for buyers is improving. Increased inventory and a slight dip in mortgage rates should help make the housing market more accessible in the coming year.
As the market stabilizes, more people will likely consider entering the market, which could lead to higher home sales in 2026. With prices cooling off and competition less intense, buyers will have more options to find the right home without facing the extreme bidding wars and overinflated prices that characterized much of the post-pandemic real estate boom.
