12 States Where Home Prices Are Starting to Drop

The housing market right now feels like a total rollercoaster. After the crazy post-pandemic boom — where bidding wars were everywhere and home prices shot through the roof — things are finally starting to slow down in some areas.

In many states, the market is shifting, and buyers are beginning to get more room to negotiate. That means investors now have a rare chance to discuss pricing, request repairs, and even get better deal terms that were almost impossible to ask for a couple of years ago.

Now the big question for people looking to grow their property portfolio is pretty simple: should you buy now, or wait a little longer and hope prices drop even more considering the current global uncertainty?

Job Cuts, Rising Insurance Costs, and More Housing Supply: Why Prices Are Dropping

One of the biggest housing market slowdowns right now is happening in Washington, D.C., where home prices have dropped by more than 3% compared to last year, based on data from Cotality’s Home Price Index.

According to real estate agent Jules Garcia from Coldwell Banker Warburg, a big reason behind this decline is job uncertainty in the federal sector. Since many people in the area depend on government-related jobs, concerns about budget cuts and position reviews are making buyers more cautious.

On top of that, D.C. and Virginia aren’t attracting the same level of tech attention they used to. For years, the region was often seen as the East Coast version of Silicon Valley, but that image has slowly faded.

Meanwhile in Florida, falling home prices are being driven by different issues. Cities like Ocala, Naples, Punta Gorda, and Cape Coral are seeing affordability problems mainly because insurance costs keep rising.

Even though Florida still attracts people because there’s no state income tax, higher insurance expenses are making homeownership more expensive overall, which is starting to cool demand.

In general, areas across the Sunbelt, California, and Texas are beginning to experience price declines, while parts of the Midwest and Rust Belt are still seeing slower but more stable growth.

For investors, this creates an interesting situation. Those who aren’t tied to a specific location now have two possible strategies:

• Buy in markets where prices are currently falling and potentially benefit later when prices recover and interest rates decrease.
• Or choose safer, slower-growing markets in the heartland, where profits may not be as huge, but risks are lower and cash flow could still stay positive even with today’s interest rates.

Before going deeper, let’s check out the 12 states where Cotality predicts home prices are continuing to move downward.

Looking at the Bigger Picture: How Long Will the Housing Market Stay Soft?

Before jumping into a property investment, it’s important to think about one thing: how long will it take before you actually see returns through rising home values?

According to a recent analysis from the American Enterprise Institute Housing Center (AEI), single-family home prices only grew by 1.1% over the past year up to February 2026. That’s actually the slowest growth AEI has recorded since they started tracking the data back in 2012.

What’s even more interesting is AEI’s prediction for the next few years. They expect average single-family home prices to dip around 1% by the end of 2026, followed by another 2% decline in both 2027 and 2028.

At the city level, around 28 major housing markets across the U.S. are already seeing price drops. This includes several large metro areas in Florida, California, and Texas.

Cape Coral, Florida, for example, has experienced a massive 9.6% price decline over the last year. Other cities like North Port (Florida), Memphis (Tennessee), Tucson (Arizona), and Palm Bay (Florida) have also seen prices fall between 3.8% and 6.1%.

But not every market is slowing down. Cities such as Kansas City, Pittsburgh, and Cleveland are actually still posting healthy growth, with gains ranging from 5.8% to 8.6%.

According to AEI co-director Ed Pinto, the current trend will probably continue for a while. Markets that experienced huge booms over the last few years are now going through corrections because prices became too expensive for many buyers.

Still, Pinto believes these areas could eventually bounce back once affordability improves again. After all, places in the Sunbelt remain attractive because many people still want to move there for lifestyle, weather, and job opportunities.

Should You Buy Now or Wait for the Market to Drop More?

For investors, this market really comes down to timing and smart calculations. Buying in a market that’s currently cooling down could turn into a great opportunity later — but only if affordability makes sense.

In the U.S., housing is generally considered affordable when mortgage payments take up around 21% or less of a household’s income. In today’s market, though, many buyers are stretching that number closer to 30%.

That’s why negotiation matters more than ever right now. Even if prices still feel high, buyers have a much stronger position compared to a few years ago.

Many sellers are getting tired of holding properties they can no longer comfortably afford, or they simply need to relocate quickly. Because of that, they’re often more open to making deals — whether through lower prices, covering closing costs, offering repair credits, or even helping buyers reduce mortgage rates.

According to Zillow home trends expert Amanda Pendleton, smart buyers today aren’t just negotiating the price itself. They’re also asking for incentives that can lower monthly expenses and reduce upfront costs while still allowing sellers to keep a price they feel comfortable with.

And based on recent market data, this trend is becoming more common. Around 67% of sellers in 2025 reportedly helped cover some or all of the buyer’s closing costs — a higher percentage than the year before.