Analysis Predicts Home Prices Will Drop in 22 U.S. Cities Next Year
Current conditions in the U.S. housing market present significant challenges for potential buyers. Home prices remain near record highs, with mortgage rates exceeding 6%. However, a recent analysis by El-Balad suggests a shift may occur in 2026, indicating that property prices are expected to decline in 22 of the largest 100 U.S. cities. This change may lead to a more favorable environment for buyers.
Forecast for Home Prices in 22 U.S. Cities
According to El-Balad’s report, the next year could mark a turning point for the housing market. Senior economist Jake Krimmel notes that mortgage rates are anticipated to decrease slightly to an average of 6.3% in 2026, down from 6.6% in 2025. This reduction in borrowing costs, combined with strong wage growth, is expected to encourage more buyers to enter the market.
A Steady Future for Real Estate
Krimmel explains that 2026 may return the market to a balanced state, allowing neither buyers nor sellers to dominate negotiations. Existing-home sales are projected to rise modestly, with an increase of less than 2% to approximately 4.13 million sales. This represents a small uptick from an estimated 4.07 million sales for the current year.
Cities Anticipating Price Declines
Among the 22 cities expected to see price drops, most are located in the Southeast and West regions. Some notable areas include:
- Cape Coral-Fort Lauderdale: Projected largest price drop of 10.2%
- North Port-Sarasota-Bradenton: Anticipated decline of 8.9%
- Florida Cities: Seven out of eight major cities in Florida are expected to experience price reductions, with Miami being the exception.
These declines in home prices can be attributed to an increase in housing inventory, providing buyers with more options, as well as a decrease in buyer demand compared to the pandemic’s peak. The 2020-2021 real estate boom was characterized by low mortgage rates and a shift towards remote work, which may no longer sustain current demand levels.
Where Prices Will Rise
In contrast, prices in the remaining 78 cities are expected to increase, although the gains will be modest, averaging around 4%. The analysis by El-Balad took into account various factors, including inventory levels, new construction, price trends, wage growth, job creation, and unemployment rates within these urban centers.
This market outlook suggests a period of adjustment as the housing landscape evolves, presenting potential opportunities for both buyers and sellers in the coming year.
