U.S. home price growth continued to slow at the start of 2026, reflecting broader stabilization across the housing market. January data shows a 0.7% year-over-year increase, down from 3.5% at the beginning of 2025 and slightly below December’s 0.9% growth rate.
National Price Growth Slows but Stabilizes
The latest figures indicate one of the lowest appreciation rates in recent years. However, monthly price changes have begun to stabilize. According to Cotality Chief Economist Dr. Selma Hepp, this trend suggests the national home price index is unlikely to experience a significant further decline in the near term.
At the same time, the number of metropolitan areas experiencing price declines has plateaued. One-third of the top 100 U.S. metros recorded year-over-year price decreases in both December and January, signaling a leveling pattern rather than continued deterioration.
Regional Performance Diverges
Housing market performance continues to vary significantly by region.
The Midwest remains the strongest-performing region, with an average annual growth rate of 3.56%. Illinois led the region with a 4.91% increase, followed by Wisconsin at 4.78% and Nebraska at 4.75%.
The Northeast also outperformed the national trend. New Jersey posted a 5.6% increase, while Connecticut followed at 5.26%. Growth in these states is supported by relative affordability in smaller markets and sustained demand in key metro areas such as Newark and Camden.
Dr. Hepp described the current housing market as a “two-speed” market. Higher-cost coastal and Sun Belt regions are undergoing price corrections, while the Midwest and Northeast continue to show resilience due to more stable employment bases and comparatively lower costs.
Price Declines Expand in Select Markets
In contrast, 11 jurisdictions recorded negative annual price growth in January.
Florida experienced the steepest decline at -2.36%, followed by Colorado at -1.31%, Utah at -1.11%, and Hawaii at -1.11%. Price declines also extended to several Western markets, including Arizona (-0.61%), Washington (-0.16%), and California (-0.15%).
This shift reflects a continued cooling of post-pandemic migration trends, along with increased housing inventory meeting more moderate buyer demand in previously high-growth regions.
Market Remains Tight Despite Cooling
Despite regional declines, broader market conditions remain constrained. Persistent supply limitations continue to keep home prices elevated. As a result, 69% of the top metropolitan areas are considered overvalued.
These conditions continue to affect affordability and limit access to homeownership in many markets.
Spring Season Outlook Shows Mixed Signals
As the spring buying season approaches, several indicators point to improving market activity. Mortgage rates have reached a three-year low, and housing inventory has begun to rebound in multiple regions. Buyers and sellers are also showing increased alignment on pricing.
However, the underlying reasons for lower mortgage rates remain a key variable. If rates decline due to broader economic cooling or rising unemployment, housing market stability could remain uncertain.
Employment Trends Continue to Influence Pricing
Looking ahead, job growth remains a primary driver of home price appreciation. Markets with consistent employment gains are expected to continue supporting price increases.
At the same time, these markets often face larger inventory shortages, which can continue to push home prices higher.
Overall, January 2026 data reflect a housing market stabilizing after a period of elevated growth, with regional variation continuing to shape performance nationwide.
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