The American housing market is telling two very different stories as 2026 begins. In Hartford, Connecticut, home prices are surging. In Austin, Texas, they're softening. The national metrics that dominated pandemic-era housing coverage—median prices, mortgage rates, inventory levels—are increasingly inadequate for understanding a market that's diverging dramatically along regional lines.

The National Picture: Modest Growth, Major Variations

At the aggregate level, home prices are expected to rise approximately 2% nationally in 2026, according to multiple forecasts. Redfin projects the median U.S. home-sale price will increase just 1% year over year, while Zillow estimates a 1.2% rise in property values.

But these modest national figures mask enormous regional disparities that are reshaping where—and whether—Americans can afford to buy homes.

The Northeast and Midwest: Scarcity Drives Prices Higher

In regions with limited new construction and slower population growth, the fundamental math of housing remains firmly tilted toward sellers. The Northeast and Midwest are seeing the fastest home price appreciation for a straightforward reason: there simply aren't enough homes available.

Realtor.com's list of top housing markets for 2026 is dominated by these regions:

  • Hartford, Connecticut leads the list, benefiting from proximity to major metros, relative affordability, and a severe shortage of listings.
  • Rochester, New York has emerged as a destination for remote workers priced out of larger cities.
  • Worcester, Massachusetts continues to attract Boston spillover demand at significantly lower price points.

These markets share common characteristics: older housing stock that isn't easily replicated, strong job markets, and minimal new construction to relieve demand pressure.

The Sun Belt Stumble: Oversupply Meets Rising Costs

In contrast, the South and West—regions that saw explosive price growth during the pandemic migration boom—are experiencing a meaningful correction. Property prices are forecast to dip in 22 of the largest 100 U.S. cities, with most located in the Southeast and West.

Several factors are converging to cool these once-hot markets:

Pandemic Migration Reversal: The remote work exodus that sent housing prices soaring in cities like Austin, Phoenix, and Boise has slowed dramatically. Some transplants are returning to their original cities as companies mandate return-to-office policies. Others, having realized the grass wasn't necessarily greener, are relocating again.

Insurance Crisis: Homeowners' insurance costs have skyrocketed in disaster-prone areas. Florida has seen premiums triple in some cases over the past three years. Texas faces similar pressures. These costs, often overlooked by out-of-state buyers focused on sticker prices, are now factoring heavily into affordability calculations.

New Construction Glut: Builders responded to pandemic-era demand by ramping up construction in Sun Belt markets with favorable zoning. That supply is now hitting the market just as demand has cooled, creating buyer-friendly conditions that didn't exist 18 months ago.

"Home prices are rising faster in the Northeast and Midwest, where there's less newly built housing. In the South and West, they're softening as pandemic-era migration slows and insurance costs climb."

— Redfin 2026 Housing Forecast

Mortgage Rates: The Constant Constraint

Regardless of region, mortgage rates remain the universal headwind for housing affordability. The 30-year fixed mortgage rate is expected to hover near 6.3% throughout 2026, according to both Realtor.com and Redfin forecasts. Fannie Mae's November projection saw rates potentially reaching 5.9% by year-end—still well above pandemic-era levels.

This rate environment means that even in markets where prices are softening, monthly payments remain elevated compared to historical norms. A buyer purchasing a median-priced home today faces approximately 35% higher monthly payments than they would have in 2021, even accounting for any price corrections.

The Buyer's Market Returns—Selectively

The National Association of Realtors (NAR) is forecasting a 14% nationwide increase in home sales for 2026, calling it a potential "buyer's market" in many areas. But that label applies unevenly.

In Sun Belt markets with growing inventory, buyers are finding negotiating power they haven't had in years. Homes are sitting on the market longer. Price reductions are becoming common. Contingencies that sellers would have laughed at in 2022 are back on the table.

In supply-constrained Northeast and Midwest markets, however, competition remains fierce. Multiple offers, waived inspections, and bidding wars persist for well-priced properties in desirable areas.

What This Means for Buyers and Sellers

For Buyers: Geography matters more than ever. If you're flexible on location, Sun Belt markets offer improving value and increasing negotiating leverage. If you're committed to a supply-constrained region, be prepared for continued competition and consider expanding your search radius to surrounding areas.

For Sellers: The days of listing any property and watching offers flood in are over—even in hot markets. Proper pricing, staging, and marketing are essential. In softening markets, realistic pricing from day one beats chasing the market down with repeated reductions.

The great housing divide of 2026 is a reminder that real estate is fundamentally local. National headlines about the housing market matter less than the specific dynamics of your target neighborhood. Before making any moves, study the data for your specific market—because what's happening in Hartford has very little to do with what's happening in Austin.