Home Price Growth Slows at the Start of 2026
Cotality, a leading provider of property information, analytics, and data-enabled solutions, has released the latest findings from its Home Price Index™ (HPI), featuring housing market data for January 2026. The report shows that U.S. home prices increased 0.74% year over year compared with January 2025, signaling a continuation of the cooling trend that defined much of 2025. On a month-over-month basis, prices dipped 0.1% from December 2025, underscoring the gradual moderation underway across many parts of the country.
A Market in Rebalancing Mode
According to Cotality’s analysis, the U.S. housing market has entered a rebalancing phase. Rather than experiencing the rapid, broad-based appreciation seen during the pandemic and immediate post-pandemic years, price trends are now more localized. Regional economic fundamentals—particularly job growth, income stability, and inventory levels—are playing a much larger role in shaping home price performance.
The Midwest currently stands out as the strongest-performing region in the country. States across this region recorded an average annual home price gain of 3.56%, far outpacing the national average. Illinois led the Midwest with a 4.91% year-over-year increase, followed closely by Wisconsin at 4.78% and Nebraska at 4.75%. These markets have benefited from relative affordability and steady employment conditions, helping them avoid the sharp corrections seen elsewhere.
In the Northeast, price resilience has also been notable. New Jersey posted the strongest statewide annual appreciation in January at 5.60%, while Connecticut followed closely at 5.26%. Smaller, relatively affordable markets in the region have attracted sustained buyer interest, while larger metropolitan divisions have continued to experience steady demand.
Metro Leaders Buck the Trend
Among the nation’s 100 largest metro areas, Newark recorded the highest year-over-year home price increase in January, rising 6.73%. Hartford posted the second-strongest gain at 6.27%. These metros reflect the broader strength of the Northeast, where comparatively moderate home prices and stable job markets are sustaining buyer activity.
However, not all regions are faring as well. The West and parts of the South are seeing clear signs of deceleration. Ten states across these regions reported negative home price appreciation in January. Florida led the declines with prices down 2.36% year over year. Colorado followed at -1.31%, while Hawaii and Utah each recorded -1.11% declines. Texas also experienced a 1.09% drop.
These corrections are largely attributed to the unwinding of pandemic-era migration patterns. Sunbelt and mountain states that once saw surging demand due to remote work flexibility are now grappling with higher inventory levels and cooling buyer enthusiasm. As new listings increase and demand normalizes, prices in these previously overheated markets are adjusting downward, particularly heading into the spring buying season.
A “Two-Speed” Housing Market
Dr. Selma Hepp, Chief Economist at Cotality, described current conditions as a “two-speed” housing market. High-cost coastal and Sunbelt regions are undergoing price corrections, while more affordable markets in the Midwest and Northeast remain comparatively stable.
She emphasized that local economic strength remains the primary driver of demand. Areas with consistent job growth and stable employment bases are better positioned to support price appreciation. However, these same markets often face larger inventory deficits, which can exert upward pressure on home prices despite broader national cooling.
The divergence highlights how affordability and economic fundamentals are now more influential than migration trends alone. Markets with balanced supply and demand, along with sustainable employment growth, are proving more resilient in the face of higher mortgage rates and cautious buyer sentiment.
Market Risk and Valuation Pressures
Cotality’s Market Risk Indicators point to continued vulnerability in several Florida metros. The five markets considered most at risk for price declines over the next 12 months are all located in the state: Cape Coral–Fort Myers, Deltona–Daytona Beach–Ormond Beach, Lakeland–Winter Haven, Palm Bay–Melbourne–Titusville, and West Palm Beach–Boca Raton–Delray Beach. These areas experienced substantial appreciation during the pandemic boom and now face elevated inventory levels and affordability challenges.
In addition, Cotality’s Market Condition Indicators show that 69 of the 100 largest U.S. metros are currently classified as overvalued. In these markets, home price indexes exceed their long-term values by more than 10%. This suggests that, despite the cooling trend, pricing pressures remain elevated in many areas, potentially limiting near-term appreciation and increasing the risk of further corrections if economic conditions weaken.
Looking ahead, Cotality forecasts a rebound in annual home price gains, projecting a 4.4% year-over-year increase by January 2027. This outlook suggests that while the market is currently moderating, a gradual return to more typical growth patterns is expected over the next year.
The projected recovery reflects expectations of stabilizing mortgage rates, improving affordability conditions, and continued job growth in key regions. However, performance will likely remain uneven across the country, with localized economic conditions playing a decisive role.
January 2026 data confirms that the U.S. housing market continues to cool, but the slowdown is far from uniform. While several Western and Southern states are experiencing price declines, the Midwest and Northeast are demonstrating notable resilience. Affordability, employment stability, and inventory dynamics have become the defining factors of this new phase.
As the market moves deeper into 2026, regional disparities are likely to persist. Buyers and sellers alike must navigate a housing environment shaped less by national momentum and more by local economic realities—marking a significant shift from the broad-based boom of recent years.
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