4 Types of Hot Housing Markets Most Likely To Cool Off in 2026

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

A hot housing market can feel like a dream for sellers cashing out at peak prices — but for buyers, it often means overpriced homes and even bidding wars. With the market shifting and interest rates reshaping buyer behavior, many overheated cities are now showing signs of cooling, and experts predict this trend will deepen.

Here are some of the hot housing markets most likely to cool off in 2026.

Overheated Markets

The markets that have been the most overheated are usually in the Sun Belt and Mountain West, according to Fred Loguidice, a real estate expert and the founder of Sell My House Fast Guys.Cities like Phoenix; Austin, Texas; Boise, Idaho; and Florida metros such as Cape Coral and Fort Myers fit that profile.

“These are the places that saw their huge population boom of folks relocating for more room, less taxation and a better way of life,” he said.

Some U.S. housing markets are so hot it wouldn’t be an overstatement to call them overheated, added Oren Sofrin, a real estate expert, investor and the founder of Eagle Cash Buyers LLC.

“Markets like Milwaukee, Virginia Beach and Kansas City might slightly cool by 2026 as the housing market continues to adjust and inventory levels increase.”

Markets With Extra Inventory

While overall inventory across the country is still below the pre-pandemic peak, many metros bounced back remarkably, Loguidice said. “Denver and Dallas, for example, are again at or above pre-pandemic levels of inventory.”

This increased supply offers greater selection for buyers and may be behind why many markets are seeing price discounts. In Denver, “nearly one-third of all listings offered price discounts, the highest rate among the top 50 metros,” Loguidice said.

Pandemic Boomtowns

During the pandemic, when the economy took a temporary dive, many people moved to towns with a lower cost of living, known as pandemic boomtowns. Many of these were small towns, like Coeur d’Alene, Idaho; or St. George, Utah, according to Ben Mizes, CEO at Clever Real Estate.

“These markets saw a spike in demand from lifestyle migration, but that demand is now waning as remote work settles and affordability worsens,” Mizes said.

Loguidice also expects these small boomtowns “to decline faster than large metros because they lack the deep, diversified economic foundations of big cities.”

Stressed Markets

A number of today’s hottest housing markets are already showing stress, Mizes said. “I expect it to accelerate by 2026.”

He suggested looking for markets with “increased inventory, price reductions and slowing in-migration,” which are “all signs of a correction.”

Resilient Markets Are Not as Great for Buyers

Not all hot markets will fall as hard, however, Loguidice said. “The most resilient markets are diversified, strong economies with an ongoing housing supply shortage” such as many Midwestern and Northeastern metros.

New York City, Boston and Buffalo, New York, for example, are still in short supply, so prices won’t plummet as fast there.

Financial Readiness and Risk for Investors

Homeowners in vulnerable markets should become financially prepared by focusing on paying off their principal, building a solid emergency fund and avoiding the temptation to tap their equity to make discretionary purchases, Loguidice said.

Make sure you get preapproved for a mortgage. “You need to have a good cash reserve as well to manage any potential repair or maintenance problems,” he pointed out.

Buy When You’re Ready

Ultimately, what matters more than whether a market is hot or cool is whether you’re ready to buy, Loguidice said.

“Hoping to perfectly time the market is a gamble. While the prices might soften, a slight drop in mortgage rates can prompt a flood of new buyers into the market once more, stoking competition. My advice is to buy when you are ready financially and can secure a house that is right for you,” he said.

Share This Article: