You've probably seen the headlines. One day it's a "market crash imminent" warning on your social feed, and the next, a report says prices just hit another record high in some suburb of New Jersey you’ve never heard of. It’s confusing. Honestly, it's exhausting.
The short answer to whether the housing market is going down isn't a simple yes or no. It's more of a "kinda, in some places, but not everywhere."
As of January 2026, we are living through what Redfin calls the Great Housing Reset. We aren't in the frantic, bidding-war-fueled chaos of 2021 anymore, but we also aren't seeing the total collapse that the "doom-scrollers" have been predicting for years. Instead, the market is finally—painfully—starting to balance out.
Why things feel so different right now
For a long time, the "lock-in effect" kept the market in a chokehold. People with 3% mortgage rates weren't about to trade that in for a 7% rate just to get an extra bedroom. But something changed recently. According to a new analysis from Realtor.com, the share of mortgages with rates above 6% has officially surpassed those with rates below 3%.
This is huge.
It means the "golden handcuffs" are finally starting to come off. People are moving again because they have to—new jobs, new babies, divorces—and they’ve finally accepted that the era of "free money" isn't coming back anytime soon. This shift is injecting some much-needed inventory back into the system.
The numbers you actually need to know
- National Home Prices: Zillow projects a modest 1.2% growth for 2026. That’s essentially flat when you factor in inflation.
- Mortgage Rates: They’ve finally dipped. Freddie Mac reported the 30-year fixed rate averaged 6.06% in mid-January, the lowest in years.
- Inventory: It's up about 20% compared to this time last year, though we are still way below "normal" pre-pandemic levels.
- Sales Volume: The National Association of Realtors (NAR) expects home sales to jump by about 14% this year as buyers who were sitting on the sidelines finally jump back in.
Is the housing market going down in your backyard?
National averages are basically useless if you're actually trying to buy a house. Real estate is intensely local. While the national "median" might be creeping up slowly, some cities are seeing real price corrections.
If you’re in the Sun Belt—think Austin, Phoenix, or parts of Florida—the answer to "is the housing market going down" might actually be a "yes." These areas saw insane price spikes during the remote-work boom. Now, inventory is piling up, and sellers are having to get real. In places like Austin, prices have already dropped significantly from their peaks.
On the flip side, the Northeast and Midwest are still holding firm. Lawrence Yun, Chief Economist at NAR, points out that markets like Hartford, Connecticut, and Buffalo, New York, are still incredibly tight. There just aren't enough houses for the people who want them. In Hartford, inventory is still down about 63% compared to 2019. If you're looking there, don't expect a "deal" anytime soon.
The New Build Dilemma
It’s not just existing homes. Builders are in a weird spot. Robert Dietz at the National Association of Home Builders says they are leaning heavily on "rate buydowns" to move houses. Basically, the sticker price might look high, but the builder is paying to lower your mortgage rate to 4.5% or 5% just to get the deal done. If you're looking for where the market is actually "going down," look at the incentives. A $10,000 credit toward closing costs is a price drop in disguise.
The "Crash" that hasn't happened (and probably won't)
A lot of people are waiting for a 2008-style fire sale. They want to see houses at 50% off.
It’s just not happening.
The math is different this time. Back in 2008, people had "ninja" loans (no income, no job). Today, homeowners have record amounts of equity. Even if prices dip 5% or 10%, most people aren't "underwater." They won't just walk away from their homes. Plus, we still have a massive housing shortage. We’ve been under-building for a decade, and the Millennial and Gen Z cohorts are in their prime home-buying years. Demand is baked in.
What about AI and jobs?
There is one wildcard: the labor market. Redfin’s Daryl Fairweather has noted that AI is starting to impact white-collar jobs. If we see a big spike in unemployment among the "laptop class," that could force more houses onto the market and drive prices down further. But so far, the job market has stayed surprisingly resilient.
How to navigate this "Reset" market
So, what do you actually do with this information?
If you're a buyer, the power dynamic is shifting. You don't necessarily have to waive your inspection or offer $50k over asking anymore. About 60% of homes sold recently involved some kind of price cut or seller concession. You have leverage—use it.
If you're a seller, the "easy mode" button has been deactivated. You can't just slap some gray paint on the walls and expect ten offers by Sunday night. You have to price it right from day one. Buyers are picky now because even with rates at 6%, a mortgage is still expensive.
Practical Steps for 2026
1. Watch the "Months of Supply"
Check your local ZIP code on sites like Redfin or Zillow. If there is more than a 4-month supply of homes, it’s a buyer’s market. Prices are likely to soften there. If it’s under 2 months, it’s still a seller’s world.
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2. Focus on the "Monthly Payment," Not the Price
With rates fluctuating around 6%, a 0.5% drop in interest rates often does more for your wallet than a $10,000 price drop. Talk to a lender about "2-1 buydowns" where the seller pays to lower your rate for the first two years.
3. Look for "Days on Market"
Homes that have been sitting for 30+ days are your best friend. Those sellers are usually tired and much more willing to negotiate on repairs or closing costs.
4. Don't Time the Bottom
The "bottom" of the market is only obvious in the rearview mirror. If you find a house you love and the monthly payment fits your budget, the long-term appreciation usually outweighs the risk of a minor 2% dip next year.
The housing market isn't "crashing," but it is finally cooling off and becoming more "normal." We’re moving toward a world where houses are homes again, not just speculative assets. It’s a slow process, but for anyone who’s been locked out of the market for the last few years, it’s finally a step in the right direction.
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Next Steps for Your Search
- Run a "Payment vs. Rent" Comparison: Use a 2026 mortgage calculator with a 6.1% rate to see if buying currently beats your local rent prices.
- Identify Your Target Micro-Market: Research whether your specific city is in a "correction zone" (like the Sun Belt) or a "supply-constrained zone" (like the Northeast) to set realistic expectations for negotiations.
- Get Pre-Approved for the "New Normal": Since rates have stabilized in the low 6s, update your pre-approval to see exactly how much purchasing power you have in today’s specific environment.