Zillow's updated 2026 home price forecast reveals significant declines in various U.S. cities, particularly in states like Florida and Texas. The report highlights a shift in market dynamics, with new homes becoming cheaper than existing ones for the first time in history. As buyer demand remains low due to affordability issues, the forecast suggests continued price drops in many areas, while some markets may see stability or slight increases.
Zillow has recently updated its home price forecast for 2026, revealing significant shifts in the housing market that could impact home buyers and investors alike. This blog post will delve into the details of the forecast, highlighting cities expected to experience the largest declines and increases in home prices, as well as the underlying factors driving these changes.
As of late 2025, home values are already experiencing notable declines in various states and cities across the U.S. According to data from Zillow and the Reventure App, home prices have dropped in 15 different states over the past year. Notably, Florida has seen a decrease of 5.1%, with some cities reporting double-digit declines. For instance, Punta Gorda and Cape Coral are indicative of a market correction that could lead to a crash.
The following states have reported year-over-year price declines:
In August alone, 24 out of 50 states experienced month-over-month declines, indicating a widespread trend of decreasing home values.
The current market is characterized by increasing price cuts from sellers, particularly in hard-hit areas. For example, a five-bedroom house in Dallas was originally listed at $650,000 but has seen a price cut to $395,000 after being on the market for over two years. Similarly, a property in North Venice, Florida, originally listed for $589,000, is now under contract for $399,000, reflecting a nearly 30% reduction.
Two primary groups are contributing to the downward pressure on home values:
An unprecedented trend has emerged in the housing market: for the first time in U.S. history, the cost of new homes is now lower than that of existing homes. This shift indicates that builders are adjusting to market conditions more rapidly than existing homeowners, who have been slower to react to the downturn. In July 2025, the average cost of a new home was $422,000, compared to $440,000 for existing homes.
This trend suggests that buyers may find better deals with new constructions rather than existing homes. As affordability remains a significant issue, potential buyers need to consider their financial capabilities carefully. For instance, to afford a $400,000 home at a 6.37% mortgage rate, a buyer would need an annual income of approximately $108,000, while the median income in the U.S. is only $84,000.
In Boca Raton, home values have already declined by 5.5% over the past year, with a forecasted decrease of 2.2% for the next 12 months. Despite the decline, inventory remains below pre-pandemic levels, suggesting that while prices are dropping, a crash is unlikely in this area.
In Bella Vista, prices have increased by 2.5% over the past year, but a significant increase in inventory (60%) suggests a forecasted decline of 4.6% in the coming year.
Zillow forecasts a 1.5% increase in Miami, despite a current decline of 4.2%. In contrast, Reventure predicts a continued decline of 4.2%, highlighting a discrepancy in market outlooks.
El Paso has seen a slight increase of 0.7% in home values, but a forecasted decline of 1.6% is expected as the market adjusts to changing conditions.
The updated Zillow forecast for 2026 paints a complex picture of the housing market, with significant declines expected in many areas while others may stabilize or see slight increases. As affordability issues persist and buyer demand remains low, potential home buyers and investors should stay informed about market trends and consider their options carefully. The current environment presents both challenges and opportunities for those looking to navigate the evolving landscape of real estate.
