Home Prices Expected to Fall in Most Cities by 2026, Top Home Economist Says

Existing home prices are likely to fall in most estimates this year, as individual sellers respond to price pressure from homebuilders who are cutting prices, according to a top residential construction economist.

Speaking at the International Builders Show in Orlando, FL, Tuesday, the National Association of Home Builders Chief Economist. Robert Dietz he said he expects home prices to stabilize in much of the country as the resale market adjusts to price competition from new construction.

“We expect that in many markets this year, resale prices will decrease to improve affordability conditions, because existing homeowners are supposed to make price gains that builders are making starting in 2022, and they haven’t done it yet,” Dietz said.

“So we think that happens in 2026 and then, it is necessary, because if we look at the price of the home to the average income. This, for me, summarizes the challenge of not being able to pay,” said the economist, showing a chart showing that the average home price is 4.9 times higher than the average income.

That’s well above the long-term historical average of roughly 3x income, and significantly higher than the 4.83x average achieved in 2005 at the height of the housing bubble.

However, Dietz pointed out that the prices of newly built houses have been falling for three years, and the average new construction is now 15% cheaper than in the fall of 2022.

Homebuilders have cut prices due to a weak market, with affordability challenges one of the key factors affecting demand. But until now, individual real estate agents have been very reluctant to lower their asking prices.

A recent Realtor.com® analysis found that, for the first time in recent history, new homes are more likely to be discounted than pre-owned homes.

In the fourth quarter, 19.3% of new construction listings offered price reductions, compared to just 18% of existing homes, according to the Quarterly New-Construction Insights report.

Also, the median new home sales price was actually lower than that of existing homes as of April 2025, reversing old trends. (To understand how strange this is, think of a car dealer who charges more for used cars than for new cars of the same model.)

According to economist Dietz, part of the new construction price relief came from smaller home sizes, with the average floor plan about 5% smaller than in 2022. But much of the decline is due to price cuts and discounts, he says.

While individual home sellers have been reluctant to let go of their high price expectations since the height of the buying frenzy, economist Dietz says he expects that to change in 2026.

“Historically, housing prices to income, a 3 to 1 ratio, that was a well-understood rule that had been around for a while,” he said. “When the price-to-income ratio is 5 to 1, it becomes difficult for those small households to save, whether it’s a 3.5% FHA loan or a 10% down payment on a conventional mortgage.”

Not all economists agree that prices will fall

Realtor.com Chief Economist Danielle Hale he also spoke at a homebuilders conference in Orlando, where he repeated his prediction that home prices will rise modestly in 2026.

“When we look at asking prices, our expectation is that they’re going to go up a little bit for the year,” Hale told the audience at the Orange County Convention Center.

Hale noted that asking prices for homes were almost lower in January compared to last year, although sales prices increased slightly, indicating continued competitive conditions in the housing market, especially in the Northeast and Midwest.

Meanwhile, the share of discount listings has declined in recent months. “That suggests that retailers are starting prices and trying to avoid having to cut prices as they move into 2026,” Hale said.

However, market conditions vary by region, with soft markets and falling prices in the South and West, and hot markets and rising prices in the Midwest and Northeast.

“It’s a great range, and there’s a lot more regional variation than we usually see in the real estate market because of the different inventory conditions that we see in these different markets across the country,” Hale said.