Home price cooling continued into January as typical prices nationwide slid 0.1% from December to land just 0.74% higher than a year ago, according to new data released by real estate analytics firm Cotality. Prices were 3.43% higher annually at the beginning of 2025.
Projecting home prices to rise 4.43% by January 2027, however, Cotality maintains a much more robust forecast for home price appreciation through the rest of the year than peer data sets suggest homebuyer demand will support. A request for comment reconciling the forecasting divergence was not returned by the time of publication.
Housing economists at the Mortgage Bankers Association, Federal Housing Finance Agency (FHFA), Redfin and Zillow projected home price growth of less than 1.5% in 2026 as the market continues digesting multiple years of rapid price appreciation. The reliably bullish National Association of Realtors is calling for average home price gains of just 2.2%.
With home price-to-income ratios hovering closer to 5 to 1 instead of historical norms between 3.5 to 1 and 4 to 1, homebuyers require a meaningful reset on affordability across the spectrum of costs eroding the economics of homeownership.
Macroeconomic uncertainties related to tariffs, shaky labor markets and rising geopolitical tensions have also consistently hurt consumer outlooks that impact homebuying sentiment in much less quantifiable ways.
“The housing market is in a rebalancing phase, and localized economic strength is the primary driver of demand,” said Cotality in market commentary accompanying its monthly Home Price Index for January, released Tuesday. Regional markets will largely continue to reflect adjustments to pandemic-era distortions, nevertheless.
Ten states and Washington, D.C., posted annual home price declines in January, led by a drop of 2.36% in Florida from a year ago. Home prices were down 1.31% in Colorado, 1.11% in Utah and Hawaii and 1.09% in Texas, “as the impact of the post-pandemic migration and expanded inventory levels cool off previously overheated markets going into the spring buying season,” the report said.
Cotality also reported that the markets most at risk for price declines over the next year are all in Florida, the continuation of a declining price trend in the state. Home prices nationwide softened notably in 2025 as existing-home sales limped to a third consecutive year of three-decade-low sales.
Nine states ultimately reported year-over-year price declines in the fourth quarter of 2025, according to the FHFA. With average rates for 30-year fixed-rate mortgages expected to hover near 6% during 2026, sustained price softening is forecast as a key driver of affordability gains projected to materialize this year, increasing annual home sales totals.
The Midwest posted the strongest annual price growth in January, landing 3.56% higher than a year ago. Home price gains of 4.91% in Illinois and 4.78% in Wisconsin led the price growth, followed by 4.75% growth in Nebraska. Inventory-starved markets across the Northeast also remained relatively more insulated from national cooling trends, with New Jersey and Connecticut posting 5.6% and 5.26% home price growth, respectively.
A separate index tracking January home-price behavior published by First American Financial Corp. recently noted that 23 of the 30 largest U.S. metro markets registered annual price declines in January, compared with 20 markets that were flat or declining the prior month.
“The current data reveals a ‘two-speed’ housing market,” said Selma Hepp, chief economist at Cotality, in Tuesday’s release. “Ultimately, locations with consistent job growth will remain the primary engines for price appreciation, but they also have larger inventory deficits, which are driving pressure on home prices.”
