The U.S. housing market experienced a correction in 2025, with property values falling in two dozen major metropolitan areas. However, forecasts suggest a stabilizing trend for 2026, as affordability improves and buyer activity picks up. This shift marks a turning point after a period of rapid growth followed by inevitable price adjustments.
Regional Trends: South Declines, Midwest Gains
As of October 2025, 24 of the 50 largest U.S. cities saw year-over-year declines in home values. Austin, Texas, and Tampa, Florida, experienced the sharpest drops at 6.1% each, followed by Miami (4.8%), Orlando (4.6%), and Dallas (4%). These markets, which saw explosive growth during the pandemic due to remote work migration, are now undergoing a correction.
Conversely, 26 major metros saw price increases, with Cleveland, Ohio, leading the way at 4.5%. Other gainers included Hartford, Connecticut (4.4%), Milwaukee (4%), and Chicago (3.7%). The Midwest and Northeast benefited from increased affordability, attracting buyers priced out of more expensive coastal markets.
This geographic divide highlights a broader trend: regions that missed out on the pandemic-era boom are now seeing gains, while overheated markets are cooling down.
National Stability with Local Variations
The median U.S. home value reached $357,275 in January 2026, showing a marginal increase of 0.1% year-over-year. This national figure masks significant local variations. While some markets experienced monthly gains, 38 of the 50 largest metros saw declines in October 2025, with Austin (-1%), Pittsburgh (-0.9%), and Dallas (-0.7%) leading the losses.
Zillow projects an overall 1.2% national increase in home values for 2026, driven by improving affordability and steady buyer interest. This modest growth suggests a more sustainable market trajectory.
Factors Driving the Recovery
Several key factors contribute to the expected stabilization in 2026:
- Improved Affordability: Mortgage rates eased to 6.25% in October 2025, the lowest in over a year. This reduced monthly mortgage payments by 1.8% compared to 2024, making homeownership more accessible.
- Increased Inventory: Total housing inventory rose 12.8% from the previous year, closing the gap with pre-pandemic levels. This increased supply gives buyers more options and negotiating power.
- Renewed Buyer Activity: New listings and pending sales jumped 5% year-over-year in October 2025, defying typical seasonal slowdowns.
- Shifting Market Conditions: The number of buyer-favored markets increased from nine to 19 in just one year. Cities like Cincinnati, Milwaukee, and Birmingham now offer significant advantages to purchasers.
Buyer Power Expanding
The market is gradually shifting toward buyers, particularly in the South. Miami, Indianapolis, Milwaukee, Pittsburgh, and New Orleans are among the strongest buyer markets. Meanwhile, Hartford, San Francisco, New York, San Jose, and Providence remain seller-friendly.
The correction in overheated markets and the recovery in undervalued regions signal a more balanced housing landscape for 2026. Improved affordability and increased inventory will likely support continued stabilization and modest growth.
