The U.S. housing market entered 2026 on shaky ground, with significant declines in home prices and slowing activity due to an affordability crisis, according to the Standard & Poor’s index. National prices rose by 0.9% year-on-year in January, a much lower rate than in December, while recording a monthly decline of 0.11%, reflecting weak demand and buyer reluctance.
Tom Malone, chief economist at CoTality, sees the market in a state of stagnation, with restrictions on sales growth and prices affected by weak incomes and financing conditions, placing it ahead of the current economic cycle.
Price pressures are concentrated in the upper segment, where luxury home prices fell by 0.25% compared to a 0.05% drop for lower-cost properties, highlighting affluent buyers’ sensitivity to financing costs. The market continued to struggle through 2025, with sellers resisting price cuts due to low interest rates, while buyers faced affordability challenges.
This deadlock led to increased inventory, lower sales, and overall price stability. The future depends on which side gives in first: seller price reductions could pressure valuations, or improved financing terms and higher incomes could attract buyers. The most likely outcome is a limited, gradual improvement rather than a major rebound or contraction.
