Realtors: 7 U.S. Cities Where Home Prices Will Drop First in 2026
Written by
Jordan Rosenfeld
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Brendan McGinley
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After several years of rapid appreciation, overheating demand and pandemic-era migration booms, the housing market is finally starting to show signs of cooling in specific pockets of the country. According to realtors across multiple regions, factors ranging from increased risks to weakening local economies will cause certain U.S. cities to experience price declines sooner than others as 2026 approaches.
While this is not so great for people hoping for a quick equity bump, it can be a great time to buy into these markets if you’re shopping for a home to live in. Here are seven cities where prices may drop soonest in 2026.
1. St. Petersburg, Florida: Extreme Weather and Insurance Costs Push Prices Down
St. Petersburg is already seeing year-over-year price declines of around 10%, which is likely to continue into 2026, according to Adam Hamilton, CEO and co-founder of REI Hub. He pointed out that extreme weather is spurring climate-related migration out of the state, while its resulting higher insurance premiums is weakening demand across Florida’s coastal markets.
“Many can’t afford those increases, and many others are choosing to move to different places instead in order to avoid them,” he said. This doesn’t bode well for this once-thriving city.
2. New Orleans: A Declining Local Economy and Rising Insurance Costs
Economic and insurance-related stressors may place downward pressure on home values in cities that once held steady due to high local tourism.
Blake Blahut, broker associate and Realtor at Realty ONE Group said, “An example of this would be New Orleans, where tourism is down and the fast-rising cost of insurance is creating more of a barrier for people to get into the market.”
While the Big Easy will always attract visitors, it may be a while before its economy is thriving again.
3. San Francisco: High Costs and Job Relocations Cool the Market
San Francisco’s already-strained housing market faces additional pressures heading toward 2026. “[M]any jobs are being relocated and the high cost of living is going to put downward pressure on values,” Blahut said.
San Francisco’s housing market was performing very well in the recent past because of “strong inward migration and strong price growth,” Blahut said, but the trend is going in the opposite direction now.
4. Phoenix: Slowing Migration and Inventory Growth
Phoenix was one of the hottest markets during the pandemic, but the rapid influx of residents has tapered off there, too, Blahut said, “likely due to rising costs.” As inventory grows and demand cools, realtors expect Phoenix to be among the first metros to see clearer price declines in 2026.
5. Austin, Texas: Oversupply and Rising Premiums Create Price Pressures
Austin’s pandemic-era boom appears to have hit its ceiling, according to Carla Gericke, a real estate agent with Porcupine Real Estate. In the last five years, she said, “Austin sprouted glass towers,” at such a rate of about 20 high-rises in the last five years, too fast for long-term stability.
“With inventory piling up, migration slowing and insurance premiums rising, the forecasts point to more softening in 2026,” she said.
6. Tampa, Florida: Slowing Migration and Insurance Costs Add Downward Pressure
Like other Gulf Coast metros, Tampa is showing early signs of weakening demand due to rising insurance rates and shifting migration patterns, Blahut said. He noted inventory increases and slowing competition, conditions that often precede price declines.
7. Minneapolis: Crime, Taxes and Cooling Demand Are Softening Prices
Minneapolis is also seeing home prices drop, due to increased crime, higher property taxes and stubborn mortgage rates, according to regional real estate investor Marisa Simonetti, with Sell House Fast MN. While broader Minnesota remains stable, Minneapolis stands out as a market likely to experience deeper price reductions.
“Job losses impact people leaving an area, and those who are behind the curve will have to discount more heavily to get out,” she said.
How to Spot Cities at Risk of Price Declines
Experts emphasize that sharply rising inventory, slowing migration and local job losses are some of the clearest warning signs that a market may soon experience price declines. Blahut said to pay attention to “the patterns of inventory rising faster than demand for two to three quarters in a row.
Simonetti added that paying attention to job growth, or lack thereof, can be an indicator of a housing market shift. “Job declines can signal the time to depart.”
What Falling Prices Mean for Buyers in 2026
These experts warned that while buyers may gain negotiation power in declining markets, they shouldn’t expect dramatic drops in both prices and mortgage rates at the same time.
“They may get one, or partial improvement on both ends, but not a substantial amount of relief on both to where it makes a meaningful difference on their monthly payment,” Blahut said.
Simonetti advised against trying to time the housing market, as well. Instead, she recommended, “Purchase properties that cash flow for investments, and make sure the monthly payments are affordable if purchasing a primary residence.”
As 2026 begins to take shape, these early-warning metros offer a clear reminder that even in a tight housing market, local conditions can shift quickly. Buyers who understand those shifts will be best positioned to make smart, strategic moves.
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