The mid-2020s housing market is moving beyond a single national storyline. Instead, recovery and continued strain are playing out regionally: some metros are finally seeing inventory and affordability improvements, while others remain deeply supply-constrained or face new headwinds. Below I map the likely winners and laggards for 2025–2026, explain the mechanics behind each outcome, and give practical takeaways for buyers, sellers and investors.
Quick snapshot (TL;DR)
- Recovering fastest: Midwest and some affordable Sun Belt metros — inventory gains + steady incomes are improving affordability. Realtor+1
- Partial recovery / inventory-dependent: Mountain West and many “Zoom towns” — demand remains strong, but tight supply limits relief. housecanary.com
- Likely to stall or cool only modestly: High-cost coastal metros (Bay Area, NYC, Seattle, Boston) — prices stay elevated and affordability remains weak without major policy or supply shocks. National Association of REALTORS®
- Wildcard regions: Some Sun Belt metros (parts of Texas and Florida) — long-term demand but vulnerability to insurance, climate and job-trend reversals. MySA
Why regions are diverging (the mechanics)
- Inventory dynamics. Markets where listings have climbed back toward — or above — pre-pandemic levels are seeing faster normalization. Builders and new-home starts have helped in many Midwestern and select Sun Belt metros. housecanary.com+1
- Affordability and incomes. Areas where wage growth keeps pace with home prices (or where prices never ran as high) benefit most from modest rate easing. JPMorgan
- Migration & job flows. Employment growth or loss (tech hubs, office return-to-work trends) can quickly flip local demand. Some commuter metros near major cities are seeing renewed demand as office routines normalize. CT Insider
- Supply constraints & zoning. Coastal and some mountain metros face persistent zoning constraints and underbuilding, which limits the impact of any rate relief. National Association of REALTORS®
- Risk & cost factors. Rising insurance costs, climate risk, or policy changes can blunt buyer appetite in otherwise fast-growing regions. MySA
Regions likely to recover in 2025–2026
1) Midwest — fastest, most durable recovery
Why: lower baseline prices, improving inventory, and steady jobs make rate improvements and small price gains translate into real affordability improvements. Expect stronger first-time-buyer activity and quicker sales in markets like Columbus, Cincinnati, Cleveland and parts of the Great Lakes. Realtor+1
Buyer playbook: Focus on entry-level neighborhoods and get pre-approved — competition will return fast once affordability improves.
Seller playbook: Price competitively; move-up sellers may finally find buyers.
2) Selected Sun Belt metros (affordable corridors)
Why: job growth and new construction in inland Sun Belt suburbs (not the most expensive coastal ZIPs) will help recover sales volume and stabilize prices. Think inland Tampa suburbs, parts of Charlotte, Raleigh outskirts, San Antonio suburbs. New construction and BTR (build-to-rent) also add supply. housecanary.com+1
Buyer playbook: Look for new-build incentives (buydowns/closing help); consider suburbs where inventory growth is strongest.
Seller playbook: Update listings to highlight commute and remote-work amenities — buyers here prize space and value.
3) Some secondary metros & commuter belts
Why: places near major job centers (but with lower prices) are gaining as workers re-evaluate commutes and value. Examples include parts of Fairfield County (CT) tied to NYC demand, and midsized metros within commuting distance of larger cities. CT Insider
Buyer playbook: Trade off commute vs. price; small concessions by sellers are possible as inventory rises.
Seller playbook: Emphasize access to transit and schools — these remain premium attributes.
Regions likely to stall or lag in 2025–2026
1) High-cost coastal metros
Why: chronic underbuilding, high prices relative to incomes, and zoning limits mean modest rate relief won’t restore broad affordability. Expect flat prices with pockets of softness in weaker micro-markets. National Association of REALTORS®
Buyer playbook: Consider long-term savings strategies (larger down payment, look to nearby more affordable suburbs).
Seller playbook: Realistic pricing and staging matter — move-in-ready homes attract the most buyers.
2) Mountain West “Zoom towns”
Why: these markets saw rapid price run-ups during the pandemic. Even with high demand, thin inventory and local resistance to denser building keep pressure on prices. Unless construction meaningfully ramps, affordability will stall. housecanary.com
Buyer playbook: Be ready to pay premiums in tight niches; alternatively, expand search radius or consider new construction queues.
Seller playbook: Expect quick sales for well-priced homes; poorly positioned homes may linger.
3) Climate- and insurance-vulnerable Sun Belt pockets
Why: some areas in Florida and parts of Texas face rising insurance costs and climate risk, which can cool buyer demand even if jobs and population trends remain strong. These are the “wildcards” — long-term fundamentals mixed with localized headwinds. MySA
Buyer playbook: Factor in insurance and resilience costs into total housing expense.
Seller playbook: Disclose and mitigate perceived climate risks; buyers are price-sensitive to these factors.
Signs to watch in the next 12–18 months
- Inventory vs. months’ supply: Watch metros where months’ supply moves above ~4–5 months — that signals meaningful balance improvement. trueparity.com
- Price growth deceleration: Flat or falling prices in a metro usually precede more buyer leverage. housecanary.com
- New-home starts & completions: Faster completion rates in a region materially ease resale pressure. Canada Mortgage and Housing Corporation
- Local job announcements/office return trends: Office policies and big employer moves can shift demand quickly (positive or negative). CT Insider
Practical advice — regional checklist
Buyers
- Midwest / affordable Sun Belt: Actively look now; competition will pick up.
- Coastal / Mountain West: Save more, be flexible on location, consider condos or new builds.
- All regions: Get pre-approved, shop lenders, and calculate insurance/resilience costs.
Sellers
- In recovering markets: You can sell but price realistically — buyers have options.
- In stalled markets: Invest in upgrades or buyer incentives to stand out, and use local comps carefully.
Investors
- Target markets with improving inventory + job growth (Midwest, select Sun Belt).
- Avoid overpaying in overheated mountain/Zoom towns unless you have long horizons and strong rental demand.
Bottom line
The national headline for 2025–2026 — “the market is recovering” — is true only in part. The bigger story is regional divergence: the Midwest and many affordable Sun Belt corridors are where the clearest recoveries will happen, while coastal metros and supply-strained mountain towns will see slower, more uneven progress. For buyers, sellers and investors, location — and an up-to-date read on local inventory, jobs and building activity — will determine whether you’re dealing with a market that’s recovering or one that’s still stalling. Realtor+2housecanary.com+2