The American Enterprise Institute’s Housing Center is projecting something the U.S. housing market has not seen since the pandemic boom began: a calendar year that ends with home prices lower than where they started. According to AEI Housing Center co-directors Edward Pinto and Tobias Peter, who shared the projection in spring 2026, national home prices will close 2026 roughly 1 percent below their January level. That would be a shallow decline in dollar terms but a symbolic break from a streak of annual gains that, by most national measures, dates back to 2012. As of this writing, AEI has not published a detailed public report or methodology document accompanying the projection, so the specific underlying assumptions have not been independently verified.
The projection puts AEI at odds with the most recent government data. The Federal Housing Finance Agency’s House Price Index, which tracks repeat sales reported by Fannie Mae and Freddie Mac, still showed year-over-year appreciation nationally in its latest available release covering transactions through early 2026. That gap between confirmed, backward-looking data and AEI’s forward-looking call is the central tension shaping this spring’s market.
Where prices stood entering 2026
The FHFA’s purchase-only index is widely considered the most reliable government gauge of home-price movement because it measures the same properties over time using actual closed-sale records. Its most recent data confirmed prices were still rising on both a monthly and annual basis as the year opened.
But the pace had been slowing for more than two years. Year-over-year appreciation nationally cooled from the double-digit surges common in 2021 and 2022 to low-single-digit territory by late 2025, according to both the FHFA index and the S&P CoreLogic Case-Shiller indices. According to FHFA data, national prices climbed more than 40 percent between early 2020 and late 2025. With 30-year fixed mortgage rates hovering between roughly 6.5 and 7 percent through much of early 2026, per Freddie Mac’s Primary Mortgage Market Survey, affordability pressure has kept many would-be buyers sidelined. Meanwhile, existing-home inventory has gradually ticked higher in several major metros after years of historically tight supply, according to data from the National Association of Realtors.
What AEI’s forecast assumes
AEI’s Housing Center has built a reputation for granular, data-driven housing analysis. Pinto and Peter have been among the more cautious voices on price sustainability in recent years. The roughly 1 percent decline the institute projects for 2026 would be shallow by historical standards, far milder than the crash of 2007 to 2011, but notable because it would snap a run of consecutive annual gains stretching back more than a decade on the FHFA and Case-Shiller national indices.
An important caveat: as of May 2026, AEI has not published a detailed methodology document or full report laying out the specific assumptions behind the call, whether those are rooted in rising unemployment expectations, inventory growth, trade-policy uncertainty, or weakening migration patterns. Until the Housing Center releases that breakdown, the projection should be treated as an attributed forecast from a credible institution, not a consensus view.
How other forecasters see the year
AEI’s outlook sits at the bearish end of a range that has been narrowing. Several organizations have published 2026 home-price outlooks, though none of the figures below have been linked to specific dated reports and should be understood as approximate characterizations of each group’s public positioning:
- The National Association of Realtors projected modest national appreciation for 2026 in its most recent annual outlook, generally in the low-single-digit range.
- The Mortgage Bankers Association similarly called for low-single-digit price gains.
- Zillow’s research team projected prices finishing the year roughly flat.
- CoreLogic flagged select Sun Belt metros as carrying elevated correction risk, without publishing a single national figure that has been independently confirmed.
In practical terms, the gap between 1 percent growth and a 1 percent decline is small for most homeowners. On a $400,000 house, it amounts to about an $8,000 swing. But the psychological shift from “prices are still rising” to “prices are falling” can reshape buyer urgency, seller expectations, and media coverage in ways that amplify the underlying move well beyond what the numbers alone would suggest.
Regional fault lines will matter more than the national number
A 1 percent national decline could mask wide variation at the metro level. Markets that saw the steepest pandemic-era run-ups, places like Austin, Boise, and Phoenix, have already experienced price plateaus or modest pullbacks as remote-work migration slowed and new construction caught up with demand. Continued softening in those metros could drag the national average lower even if supply-constrained markets in the Midwest and Northeast hold firm or edge higher
The pattern from 2023 and 2024 offers a useful template: Sun Belt metros cooled while tight-inventory Northeastern cities kept appreciating. Without a verified regional breakdown from AEI, it is impossible to say exactly where the institute expects weakness to concentrate. Buyers and sellers will get more actionable insight from their local inventory levels, median days on market, and price-per-square-foot trends than from any single national headline.
How the projection interacts with current market conditions
AEI’s call lands at a moment when several measurable market indicators are shifting. Existing-home inventory in April 2026 was higher than at the same point in 2025 in many large metros, according to NAR data, giving buyers more leverage than they have had in years. At the same time, new-home completions have been running above their 2019 pace in Sun Belt states, adding supply in the regions most likely to see price softening.
Mortgage rates remain the wild card. If borrowing costs drift below 6.5 percent later in the year, pent-up demand from sidelined buyers could flood back into the market and support prices, undermining any forecast built on sustained affordability pressure. If rates climb, or if broader economic headwinds from trade-policy shifts and slowing job growth intensify, the conditions AEI appears to be pricing in would strengthen.
For sellers in markets where inventory has been climbing and listings are sitting longer, pricing a home accurately from the start and being open to concessions on closing costs or repairs matters more than it did a year ago. Overpricing in a flat-to-softening market risks chasing prices down. For investors, a mild price decline paired with stable or rising rents could improve capitalization rates on new acquisitions, but applying a national forecast to a specific neighborhood is risky without knowing the assumptions behind it.
FHFA releases through summer will test AEI’s call
The next several FHFA reports will be the most telling. Each monthly release extends the data window further into 2026, revealing whether the early-year appreciation trend held, flattened, or reversed during the critical spring selling season. The agency publishes its release schedule and data on its website, and each new report will either narrow or widen the gap between the government’s backward-looking measurements and AEI’s forward-looking call.
The housing market right now sits closer to an inflection point than a cliff edge. Government data confirm prices were still rising as 2026 opened. A respected think tank says that will not last. The distance between those two statements is where the real story will play out over the next several months, and anyone making a major housing decision should plan for a range of outcomes rather than anchor to a single number.
