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By Giulia Carbonaro
Senior Reporter
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The last time that home prices were falling in America was over two years ago, when the country reported five straight months of year-over-year declines between February and June 2023.
It was supposed to be the beginning of a meaningful correction after the frenzied years of the pandemic, but prices quickly rebounded due to low inventory. Since then, they have continued rising year-over-year every month, even if at a much slower pace over the past 12 months.
As Americans wish each other a happy new year, those who have been struggling to buy or sell a home in 2025 are likely hoping for home prices to finally fall in 2026. But experts, while bearing relatively good news, do not necessarily believe that is possible just yet.
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How High Are Home Prices Right Now?
As of the four weeks ending on December 7, the median sale price of a typical U.S. home was $389,123, according to Redfin data, up 2 percent from a year earlier. The median asking price was $382,535, up 2.6 percent from a year earlier.
While these year-over-year increases are quite little compared to the double-digit jumps reported between 2020 and 2022, home prices have not yet stopped their climb, and they remain much higher than before the pandemic. As of early 2025, according to the Joint Center for Housing Studies of Harvard University (JCHS), home prices were up 60 percent nationwide since 2019.
That makes for a median existing single-family home price that is “a shocking five times the median household income,” Daniel McCue, a senior research associate at the Center, said in a report.
This price is also “significantly above the price-to-income ratio of three that has traditionally been considered affordable,” which considers households who spend over 30 percent of their income on housing cost-burdened.
As a result of higher home prices, historically elevated borrowing costs and other rising housing costs, homeownership rates fell to 65 percent in the second quarter of 2025, according to Census data—the lowest level since late 2019.
What Happened In 2025?
Ongoing affordability challenges such as the ones described above have put a damper on demand, leading to shrinking sales this year. In spring and summer, two traditionally busy times for the U.S. housing market, sales actually fell compared to a year earlier.
In the fall, a traditionally quieter time, demand had slightly recovered thanks to lower mortgage rates, but sales remained sluggish. In the four weeks ending on December 7, pending home sales were down 4.1 percent compared to a year earlier, according to Redfin—the biggest decline in 10 months.
Buyers’ withdrawal has led to a pile-up of inventory across the country, putting pressure on sellers to lower their asking prices and shifting the market in their favor, especially in those parts of the country which have seen the biggest glut of for-sale homes, such as states in the Sun Belt. In Florida and Texas, the two states which built the most housing during the pandemic, prices are now falling year-over-year.
“2025 saw small changes from the prior year in terms of home sales and home prices, but the inventory situation clearly is improving with more choices for homebuyers,” Lawrence Yun, chief economist at the National Association of Realtors (NAR), told Newsweek.
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“This year was a continuation of the trends that started evolving in 2023-2024,” Selma Hepp, Cotality’s chief economist, told Newsweek.
“I think the pandemic brought on a big dislocation in the housing market, and so we are still going through a process of normalizing from that point. In 2025, we saw an increase in inventory, whereas we bottomed out in terms of inventory in 2024. We started seeing less competition in the housing market, with buyers finally starting feeling like they can have some negotiating power.”
But the country tells the tales of two markets right now. In parts of the country where inventory remains tight—the Northeast and the Midwest—home prices are still high and rising faster than the rest of the country.
And because mortgage rates have not dropped significantly this year, home sales have failed to rebound as much as some would have expected.
What Will 2026 Bring?
Redfin expects next year to bring about “The Great Housing Reset,” as affordability will improve thanks to home prices finally growing slower than wages for a sustained period for the first time since the financial crisis of 2008.
According to the company, the median U.S. home-sale price will rise 1 percent year-over-year in 2026 and sales will climb 3 percent.
Realtor.com, on the other hand, expects home prices to rise modestly next year by 2.2 percent, while sales will rise 1.7 percent.
Yun said he expects “meaningfully higher home sales after three years of subpar performance,” as Americans face lower mortgage rates and rising inventory levels.
“A sales gain of 14 percent (our projection) means more Americans will be on the move,” Yun said. “The market will be considered neutral with neither buyers nor sellers having a definite edge. It will be all about understanding local micro-market characteristics and about who has the better negotiating skills."
Home prices will fall, Yun said—but only in a few markets reporting temporary declines.
“The majority of markets will witness a further rise in home prices due to lower mortgage rates, job gains, and historically low distressed property sales,” he said. NAR expects mortgage rates to fall to an average 6 percent by 2026.
“The Midwest is offering attractive low prices for homebuyers. Anyone with a good middle-income job should be able to buy in the Midwest,” Yun added.
“We expect a home price turnaround in the fast job-creating states of Florida, Texas, and Utah,” he said. “After the temporary dips in home prices from too much supply and too active homebuilding, the job gains are bringing about a new set of potential home buyers.”
Hepp agrees that the housing market will remain bifurcated next year, and whether prices will fall or rise will depend on where buyers are.
“There are such wide regional differences right now. We see markets, in the South and the Southeast, that have had a lot of appreciation during the pandemic and are now stalling or where prices have declined,” she said.
“Then you have the Midwest and the Northeast, where we didn’t necessarily see a lot of appreciation—or not as much–during the pandemic and now they remain robust in terms of price growth,” she added.
In their forecast, Cotality expects home price growth to continue at the national level next year, though at a “much lower” rate than last year—about 2 percent overall growth.
“Next year we might see 2 to 4 percent overall growth, because we do think that those higher-end markets with higher appreciation will compensate for declines in other markets,” Hepp said.
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