A homeowner in Cape Coral, Florida, who closed on a house in 2022 has likely lost a significant chunk of equity since then. Based on the metro’s 9.1% price decline and a median purchase price that hovered near $350,000 during the pandemic boom, that loss could easily exceed $30,000. Meanwhile, a buyer who closed the same year in Allentown, Pennsylvania, has watched their home’s value climb steadily in the opposite direction. Those two realities now coexist in the same national housing market, and the gap between them is the widest in more than a decade.
U.S. home prices rose just 1.1% year over year as of January 2026, according to the Federal Housing Finance Agency’s monthly House Price Index. That is the weakest annual gain since 2012, when the market was still recovering from the foreclosure crisis. But the national number masks a dramatic regional split: Florida posted outright declines, while parts of Pennsylvania and New Jersey surged by close to 9%.
The Sun Belt unwind
Florida statewide saw prices fall 2.7% in the fourth quarter of 2025, according to the FHFA’s quarterly report. Cape Coral-Fort Myers, a metro that attracted waves of remote workers and retirees during 2021 and 2022, recorded the steepest decline among all tracked areas: a 9.1% drop. For owners who purchased near the peak, that kind of loss can push a home underwater, meaning the mortgage balance exceeds the property’s current market value.
Several forces are compounding the damage. New construction permitted during the boom years has been delivering units into a market where demand has cooled considerably. Florida’s homeowners insurance crisis has added thousands of dollars a year to carrying costs. The Insurance Information Institute has reported that average annual premiums in Florida run roughly two to three times the national average, depending on the coverage level and county. Property taxes tied to inflated 2022 and 2023 assessments have not fully adjusted downward either, squeezing household budgets from multiple directions at once.
The FHFA index tracks prices on existing homes financed through conforming mortgages, so it does not directly measure inventory levels or insurance effects. But the price signal is unambiguous: buyers in these metros are either offering less or stepping away entirely.
The Rust Belt breakout
On the other end of the spectrum, the East North Central census division, covering Ohio, Indiana, Illinois, Michigan, and Wisconsin, posted a 5.0% annual gain in the same FHFA quarterly data. The standout metro was Allentown-Bethlehem-Easton, straddling the Pennsylvania-New Jersey border, where prices climbed 8.9%. That is nearly nine times the national rate.
The appeal centers on affordability. Median home prices in the Allentown metro remain well below those in nearby Philadelphia and New York, giving buyers significantly more purchasing power per dollar of income. The metro also sits within commuting range of higher-wage job centers in both states, which has drawn remote workers, young families, and households priced out of coastal markets.
Similar dynamics are playing out across the industrial Midwest. Metros like Columbus, Ohio, and Grand Rapids, Michigan, have seen steady demand from buyers who can no longer compete in pricier regions. The FHFA data does not include employment or migration overlays, so the precise mix of job growth, remote-work relocation, and relative value driving these gains is still being sorted out. But the price trajectory is clear and has been consistent across multiple quarters.
An 18-point gap between winners and losers
The spread between the best-performing and worst-performing metros in the FHFA data now exceeds 18 percentage points. That divergence is unusually wide by historical standards and signals that the national average has become a poor guide for anyone trying to understand what is happening in their own market. A seller in Cape Coral faces a fundamentally different set of choices than a seller in Allentown, even though both fall under the same 1.1% headline.
The FHFA House Price Index draws on actual purchase transactions recorded by Fannie Mae and Freddie Mac, covering millions of repeat sales nationwide. That methodology makes it one of the most reliable gauges of price direction available. It does exclude cash purchases, jumbo loans, and government-insured mortgages, which means the full picture in any given metro may differ somewhat. But for tracking broad trends, the index is widely considered the gold standard among federal housing data.
Monthly readings tend to be more volatile than quarterly ones, so the 1.1% January figure should be read alongside the Q4 2025 quarterly rate of 1.8%. Both point in the same direction: national appreciation is losing momentum, and the slowdown has been steady rather than sudden.
What this means for owners and buyers right now
For homeowners in declining Sun Belt markets, the 9.1% annual drop in Cape Coral does not guarantee further losses, but it does mean that anyone who purchased in 2022 or later may have limited or negative equity. Refinancing becomes harder in that situation, and selling may require bringing cash to the closing table. The most useful first step for concerned owners is checking a property’s current estimated value against the outstanding mortgage balance, using recent comparable sales rather than automated estimates that often lag a falling market.
Mortgage rates add another layer of complexity everywhere. According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed rate hovered near 7% through much of late 2025 and into early 2026, suppressing transaction volume nationally and keeping many would-be sellers locked into lower rates they secured years ago. That dynamic limits inventory in appreciating markets and slows the correction in declining ones.
In fast-appreciating Rust Belt metros, an 8.9% annual gain means prices are moving fast enough to outpace wage growth in many local industries. Getting pre-approved and acting quickly matters more in a market appreciating at that pace than in a flat or declining one, because the same monthly payment budget buys a noticeably smaller home a year from now at that rate of increase.
For policymakers, the widening split raises questions about one-size-fits-all housing interventions. Measures aimed at cooling overheated markets could backfire in metros already seeing outright price declines. Affordability programs designed around national averages may undershoot needs in places where values are climbing close to 9% a year. And local governments in falling-price regions face a looming fiscal challenge: declining assessed values eventually weigh on property tax revenues, even as residents demand more investment in resilience and infrastructure.
Where the FHFA and Case-Shiller data converge and diverge
The FHFA numbers are strong on direction but limited on causation. The S&P CoreLogic Case-Shiller Home Price Index, which uses a similar repeat-sales methodology but covers a different sample of transactions, showed broadly consistent deceleration in its February 2026 release covering Q4 2025 data. That reinforces the slowdown narrative from a second independent source, though Case-Shiller’s 20-city composite weights toward large metros and may underrepresent the smaller Rust Belt cities posting the strongest gains.
Neither index can predict where prices go next. The current pattern of weak national growth paired with sharp local divergence may persist as borrowing costs, insurance dynamics, and migration flows continue to play out differently across regions. Commentary from brokerages and lenders can add texture, but those sources carry their own incentives: a brokerage benefits from encouraging transactions, and a lender benefits from origination volume. That does not make their analysis wrong, but it is worth weighing accordingly.
Both the FHFA and Case-Shiller indexes show where prices have been, not where they are headed. For the roughly 65% of American households that own their home, the practical takeaway as of spring 2026 is to ground any buying, selling, or refinancing decision in local transaction data rather than national headlines. The 1.1% national figure describes almost no one’s actual market.
