Summary: The US housing market is undergoing a quiet but significant transformation. While home prices are expected to stall at 0% nationally in 2026, underlying shifts include a dramatic pullback in multifamily construction, changing migration patterns toward smaller markets, rising influence of AI hubs on local housing, and persistent affordability challenges that are keeping many buyers on the sidelines .
The New Equilibrium: Prices Stall, but Affordability Remains Elusive
After nearly doubling in the last decade, U.S. house prices are expected to stall at 0% nationally in 2026 . This doesn’t mean prices are falling dramatically—it means the market has reached a delicate equilibrium where modest improvements in demand are likely offset by increased supply.
The house price-to-income ratio has remained near historic highs for three years, and the U.S. remains the only developed market outside Japan that didn’t see home prices fall during the recent tightening cycle. The prevalence of 30-year fixed-rate mortgages has created a “lock-in” effect, where homeowners are reluctant to move and sacrifice their lower mortgage rates. This keeps prices high despite falling demand .
For buyers, the national picture masks significant regional variation. House prices are falling the most along the West Coast and Sun Belt, where there remains a glut of new homes following the pandemic-era construction boom . Realtor.com has revised its 2026 home price growth projection down to 1.2%, below the expected inflation rate of 3.4%, meaning home prices are shrinking in real terms even as they tick nominally higher .
The Supply Picture: Builders Pull Back
The post-COVID construction boom created a significant oversupply in some markets. Between 2022 and 2025, 2.2 million multifamily units were delivered—560,000 per year on average—compared to just 245,000 units annually between 2001 and 2020 . That surge has now reversed dramatically.
New construction starts have fallen 50% nationally from 2023 levels . Single-family homebuilding fell for a third straight month in June 2026, while permits for future construction dropped to the lowest level in 10 months . Builders are increasingly cautious, weighed down by:
- Stubbornly high mortgage rates hovering around 6.55%, up nearly 60 basis points since February
- Rising costs for land and materials
- A glut of unsold new homes on the market, with the stock of unsold new single-family homes back near levels last seen in late 2007
Yet there’s a silver lining. The pullback in new supply is occurring against a backdrop of underbuilding since the Great Financial Crisis in many U.S. housing markets, particularly in urban and infill locations . The U.S. faces a housing deficit of approximately 4.74 million units, meaning the country has stopped digging its housing hole but is not yet building its way out .
The Rental Market Recalibration
Elevated home prices and higher mortgage rates have widened the rent-versus-own cost gap, extending renter tenure and supporting resilient demand for multifamily housing . The challenged for-sale affordability is expected to create 2.5 million new renter households from 2025 to 2028 as the homeownership rate declines from 65.6% to 64.7% .
This has made multifamily an increasingly attractive investment category. Valuations have adjusted and now sit below replacement cost in many markets, offering attractive entry points for investors . However, rents are softening nationally—Realtor.com forecasts a 1.2% decline in rents for 2026, with vacancy rates at 7.3%, close to the long-term average .
Where Americans Are Actually Moving
The old narrative of pandemic-era migration to Sun Belt states is becoming more nuanced. Americans are increasingly moving to smaller markets rather than urban cores as they seek cheaper housing and better quality of life .
Key Migration Shifts
- Oregon was the most popular moving destination for the first time ever in 2025
- Florida and Texas are seeing more balanced migration after huge influxes during COVID
- Six of the top 10 inbound states were in the South and South Atlantic: West Virginia, South Carolina, North Carolina, Arkansas, Alabama, and Delaware
- Younger millennials and Gen Z are favoring New Jersey as a more affordable alternative to New York City
This migration shift has significant implications for commercial real estate. The need for more affordable housing, more modest office parks, and middle- to lower-income retail spaces are better bets for investors than premium developments. As one expert noted, “We do need to be smarter and pick our spots more carefully from a commercial real estate perspective going forward” .
The AI Factor: Tech Hubs Displacing Local Buyers
An emerging trend reshaping housing markets is the rise of AI and data centers. In 39 of the nation’s top 100 metros, local homebuyers are being decisively outshopped by newcomers seeking opportunity .
Markets Seeing the Biggest Shifts
- San Francisco has cemented its status as a global AI hub, with out-of-market traffic climbing to 59% (up from 33% six years ago). High-earning AI professionals exert broad upward pressure on prices, effectively pricing out local workers
- Philadelphia and Pittsburgh have emerged as major AI and data center hubs, with Google, Blackstone, and Amazon investing billions. External demand increased from ~30% to over 53% in six years
- Detroit saw external online traffic hit 52.4% (up from 29.2% six years earlier), driven by a $7 billion AI data center project. Buyers are coming from Chicago and other Midwest markets, attracted by architectural character and value
- Omaha experienced a surge in out-of-market demand to nearly 60% (up from 36% in 2019), driven by Google and Meta data center investments
This influx of outside capital acts as a permanent “price floor,” making property values resilient due to tech wealth, but at the same time threatening local affordability as housing costs detach from local wages .
The “Private Listing” Wildcard
One development worth tracking is the expansion of private listing networks—homes marketed and sold outside the Multiple Listing Service (MLS). Realtor.com flagged this as a wildcard with meaningful structural implications .
“Sellers who go private are trading away visibility and competition among buyers, and that competition is usually what pushes a sale price up,” says Danielle Hale, chief economist at Realtor.com. “For buyers, it means they aren’t seeing every home or the whole market, making it harder to know what a fair price even looks like” .
Policy Impacts: More Modest Than Advertised
The Trump administration has announced two new housing reforms :
- A ban on institutional investors purchasing single-family homes—But institutional investors make up only about 1-3% of the market, so the policy is unlikely to be a game-changer. Many have already pivoted to building their own build-to-rent communities
- Fannie Mae and Freddie Mac buying up to $200 billion in MBS—This accounts for just ~1.4% of the approximately $14.5 trillion mortgage market and will likely reduce 30-year mortgage yields by only 10-15 basis points at most
The bipartisan housing affordability legislation recently passed by Congress may have more impact, but economists note it will take time: “The potential uplift to housing starts from streamlining environmental reviews, easing rules on manufactured housing, and encouraging zoning reform will take time to filter through” .
What This Means for Buyers and Sellers
For Buyers
- Negotiating power is increasing. “The housing market is inching forward as sellers reset expectations, price growth cools, and buyers gain more negotiating power”
- Don’t wait for a crash. Real price declines will be modest—about 1-2% annually—not dramatic
- Consider becoming a “stepping stone” buyer. As one mortgage broker put it: “They have to start thinking about housing, especially their first house, as a stepping stone, not a forever home”
For Sellers
- Reset expectations. Sellers who meet the market with realistic asking prices are getting deals done
- Document everything. Homes with proven maintenance records and transparency command premium prices
For Investors
- Look to multifamily. Valuations have adjusted below replacement cost in many markets
- Follow migration patterns. Smaller markets and secondary cities offer better value than overheated Sun Belt metros
- Be strategic about AI hubs. Tech investment creates permanent price floors but also affordability challenges
Frequently Asked Questions
1. Will home prices crash in 2026?
No. J.P. Morgan expects prices to stall at 0% nationally, with modest regional declines in the West Coast and Sun Belt where there is oversupply. Real prices (adjusted for inflation) are declining modestly .
2. Why are home prices still high despite falling demand?
The 30-year fixed-rate mortgage creates a “lock-in” effect—current homeowners are reluctant to move and sacrifice their low rates, keeping supply constrained even as demand softens .
3. Is it a good time to buy a home?
Buyers are gaining negotiating power. Sellers are resetting expectations, price growth is cooling, and monthly mortgage payments are projected to come in nearly 2% below last year’s . However, affordability remains a significant challenge.
4. Where are Americans moving right now?
Americans are moving to smaller markets rather than urban cores, seeking cheaper housing and better quality of life. Oregon was the most popular destination in 2025, while Florida and Texas are seeing more balanced migration .
5. What is the housing shortage in the U.S.?
Estimates vary. J.P. Morgan puts the figure at 1.2 million homes, while Zillow estimates 4.74 million units. Current building levels have merely caused the deficit to hold flat .
6. How are AI and data centers affecting housing?
AI hubs like San Francisco, Pittsburgh, Detroit, and Omaha are attracting high-earning professionals, driving up prices and displacing local buyers. Out-of-market demand has surged dramatically in these metros .
7. Will mortgage rates come down?
Geopolitical tensions and sticky inflation have pushed rates higher, with the 30-year fixed at 6.55%. Markets now expect one to two rate hikes rather than cuts by December 2026 .
8. What is the private listing trend?
More homes are being marketed and sold outside the Multiple Listing Service, which can reduce competition and make it harder for buyers to know what a fair price is .
9. Will new policies help affordability?
The ban on institutional investors and MBS purchases by Fannie/Freddie are expected to have only modest impacts. Housing reforms like zoning changes and streamlined reviews will take time to filter through .
10. Is multifamily a good investment now?
Yes. Valuations have adjusted below replacement cost, demand is supported by for-sale affordability challenges, and new construction has fallen 50% from 2023 levels, thinning the pipeline .
Making Sense of a Market in Transition
The U.S. housing market is not crashing. It is recalibrating. After a decade of relentless price appreciation, the market is finding a new equilibrium—one characterized by stalled national prices, regional divergence, shifting migration patterns, and the quiet emergence of AI hubs as new demand centers.
For buyers, this means more negotiating power and the ability to be more selective. For sellers, it means resetting expectations and meeting the market where it is. For investors, the opportunities lie in multifamily, secondary markets, and understanding the structural shifts that are reshaping demand.
The housing crisis won’t be solved overnight, but the market is slowly becoming more navigable. The key is understanding the trends that matter—not just the headlines.
Key Market Signals to Watch
- Price Growth Slowing: National home prices expected to stall at 0% in 2026
- Building Pullback: Single-family starts down for third straight month; multifamily starts down 50% from 2023 peaks
- Migration Shift: Smaller markets and secondary cities gaining favor over Sun Belt metros
- AI Impact: Tech hubs driving out-of-market demand and displacing local buyers in 39 of top 100 metros
- Rental Softening: Rents expected to decline 1.2% in 2026 as vacancy normalizes
- Policy Modesty: New housing reforms likely to have limited near-term impact
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