The idea of a single “national housing market” is more of a shorthand for economists and analysts than a reality. Real estate is — and always has been — local.
Conditions are driven by factors like job growth, migration patterns, new construction, local zoning and even neighborhood-level inventory. All of these factors can vary dramatically from one metro (or even one ZIP code) to another.
What looks like a slowdown nationally can mask a mix of very different local stories. Some markets are still competitive with tight inventory and quick sales, while others are seeing longer days on market, price cuts and softer demand.
To better understand these differences, researchers at Construction Coverage recently developed a composite score that ranks local real estate markets using key indicators from Redfin data.
The analysis incorporates year-over-year changes in median sale price (2024–2025), the share of homes selling above asking price (2025), median days on market (2025), average sale-to-list price ratios (2025) and the share of listings with price reductions (2025). The analysis offers a more nuanced view of where demand remains strongest and where momentum is beginning to fade.
Coastal strength returns as Sun Belt surge fades
According to the analysis, housing momentum has shifted decisively toward the Northeast, where supply constraints are keeping competition elevated.
Seven of the nation’s 10 hottest state-level markets are now clustered in the region, led by Connecticut with a composite score of 93.9. New Jersey (89.), Rhode Island (87.8) and New York (86.9) follow close behind. This underscores how persistent inventory shortages are sustaining demand even as broader conditions soften.
California, despite its high cost of living, also remains firmly in the mix, posting a score of 62.9. Several of its northern metros — including San Francisco, San Jose and Oakland — rank among the hottest large-city markets, driven in part by the ongoing difficulty of adding new supply.
In both the Northeast and California, structural constraints like dense urban development patterns and restrictive zoning continue to limit new construction, keeping inventories tight and prices elevated.
Framing state-level markets like New Jersey as “hot” may be a bit of a misnomer, though. According to the New Jersey Real Estate Network, the Garden State’s housing market in February 2026 sent a clear signal: activity slowed, but prices didn’t. Closed sales dropped 11.3 percent year over year and inventory dipped 1.1 percent, yet the median sale price still rose 5.4 percent.
For New Jersey buyers and sellers, that means this isn’t a true cooldown. Demand remains, but affordability pressures and limited supply are keeping deals from closing. Well-priced, well-presented homes are still commanding gains, particularly in tighter segments.
The takeaway: New Jersey remains a price-resilient market, but it’s far more selective. Buyers are cautious and payment-focused, while sellers need sharper pricing and strategy to win.
By contrast, many once-booming markets in the South and Mountain West are losing steam. Cities that surged during the pandemic-era migration wave, including Arlington, Texas; Fort Worth, Texas; and Austin, Texas, have fallen sharply in the rankings, moving from the top 15 in 2021 to the bottom tier entering 2026.
A similar reversal is playing out in Arizona. Phoenix and Mesa have dropped near the bottom after being among the country’s most competitive markets just a few years ago. In these regions, the combination of rapid price appreciation, higher mortgage rates and shifting return-to-office mandates has cooled demand, eroding the affordability advantage that initially drew buyers in.
Redfin says the Phoenix housing market remains somewhat competitive, but momentum has cooled. Homes are averaging about one offer and selling in roughly 62 days. The median sale price fell to $461,000 last month, down 2.4 percent year over year, while the price per square foot declined 3.1 percent to $280 per square foot.
The shift points to softer pricing even as demand persists, with buyers taking more time and pushing back on valuations.
An example of a cooling Sunbelt market
North Carolina’s housing market is a good example of one that has cooled off. The Tar Heel State was ranked 42nd in the Construction Coverage analysis, with a composite score of 29.4.
Ryan Fitzgerald, owner of Raleigh Realty, says the Raleigh, North Carolina, market is entering a more balanced phase after several years of pandemic-era intensity. However, while activity has cooled from the pace of 2021 through 2023, he said Raleigh has largely avoided the sharper downturns seen in markets like Austin, Texas, and Jacksonville, Florida.
“We are no longer in a bidding war environment where homes go under contract within 48 hours with waived contingencies and all cash offers,” Fitzgerald told Inman. “However, well-priced homes in desirable areas are still selling steadily.”
Over the past year, Fitzgerald said the mechanics of the transaction have also normalized. Buyers are once again conducting full inspections, appraisal contingencies have returned, and sellers are negotiating on repairs. This is a stark contrast to the take-it-or-leave-it dynamics of the previous cycle.
Pricing, he said, has also become more critical. Homes that miss the mark on price sit on the market longer and often require reductions to attract interest.
Looking ahead, Fitzgerald expects the market to stabilize through the rest of 2026, with mortgage rates remaining the key variable. A rise in rates could push some buyers to act quickly to lock in financing, while simultaneously sidelining more price-sensitive households.
“Raleigh has strong fundamentals that should shield it from experiencing more severe downturns, including plenty of corporate relocation activity, a rapidly growing technology industry, several well-respected universities, and ongoing increases in population,” Fitzgerald said.
Inventory, not geography, is defining the market
According to some, the housing narrative in 2026 is shifting away from the familiar “hot Sun Belt vs. cooling coasts” framework that has been so common in the past few years.
Instead, the real dividing line is emerging between markets with constrained inventory and those still digesting the rapid price growth of the pandemic years, according to Ben Mizes, President of Clever Real Estate.
In the weeks after the Iran conflict escalated, mortgage rates jumped, wiping out roughly $25,000 in buying power for the typical U.S. homebuyer. Even in markets where inventory has improved, higher borrowing costs continue to limit purchasing power, reshaping demand patterns across the country.
That shift is particularly evident in formerly red-hot Southern metros. “Other states are experiencing this to varying degrees, but Texas ranked last in the Construction Coverage analysis, and Austin and San Antonio ranked near the bottom as large cities. This indicates the demand is soft due to rapid increases in home prices,” Mizes told Inman.
Conversely, he said, markets with sustained supply constraints and resilient job markets can still appear “hot” even when the rest of the country is experiencing a sluggish economy. That, in part, explains the renewed strength of some expensive coastal cities despite high interest rates.
“I expect that the rest of 2026 will be extremely localized,” Mizes said. “Markets with rising inventory and affordability as a leading constraint will tilt toward buyers. Markets that suffer from tight supply will remain at the leading edge of the pack and compete without a broad nationwide recovery or growth.”
Mizes said the common thread across all markets is constraint. Elevated mortgage rates are expected to keep both inventory and transaction volume subdued, anchoring the broader housing economy in a period of slower sales and limited movement, even as local conditions continue to diverge.
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