“Our housing market isn’t going to be rebalanced by next year, or even into 2027.” That is the forecast of Dr. Selma Hepp, Cotality’s chief economist, in a report on property market trends.
She predicted, however, that after 2025 — a year of recalibration — the market will start to stabilize, slowly and gradually.
“As mortgage rates settle near 6% and more typical market conditions start emerging, buyers and sellers will start to see signals that inspire confidence.”
Nevertheless, affordability will remain a concern in the year ahead, not just because of principal and interest. The additional burden will arise from non-mortgage costs such as insurance, utility bills and property taxes, which jumped 30% in 2025. Insurance premiums nationwide are expected to rise by 8% in 2026, outpacing inflation.
In every state in the nation, escrow payments constituted a large share of the monthly mortgage payment, especially in Florida and Colorado, where they accounted for 55% and 57%, respectively.
The significance of these developments goes beyond higher income being spent on these essentials. They also account for a rising share of homeowners who are delinquent on their mortgages, especially in the South and Midwest and deter others from attempting homeownership.
Slow growth in home prices and home sales was a drag in 2025, including in July—the first time Cotality has ever recorded negative month-over-month price growth. For the year, home prices rose by only 1.1% or $20,000 for the median home. Other negatives were interest rates kept high by inflation, declining migration and “a generational divide” in the destinations households moved to.
While more stable transaction volumes and prices are expected in 2026, structural issues stemming from policy changes and rapidly rising costs are expected to slow the market’s recovery. Real home prices on average rose only 1.8% in 2025 – below the inflation rate – and are likely to remain flat, which could improve affordability. Sales are expected to rise 7% in 2026, Cotality reported.
Some regions have it better than others. Prices in the Northeast remain resilient due to its job market and affordable metro areas. The highest annual price growth in October 2025 was recorded in Terre Haute, IN (15%), Youngstown, OH (13%), Muncie, IN (11.6%), Muskegon, MI (10.6%), Kokomo, IN (10%), Pittsfield, MA (10%), Fond du Lac, WI (10%), Grand Island, NE (9.2%), Lima, OH (9.1%) and East Wenatchee, WA (8.8%).
Nationwide, the lowest home price gains in 2025 were recorded in July (-1.5%), rising to 1.3% in August and dipping to 1.1% in October.
The Sunbelt and West continue to see a glut of new listings that hold down prices, while in Florida and Texas, in-migration has fallen.
This pattern creates opportunities for investors looking for bargains. According to the report, investor activity in 2025 accounted for one-third of all single-family home purchases. In April 2020, investors were only 14.5% of all buyers. By November 2025, that share had increased to 30.9% -- below the year’s peak of 31.9%.
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