America’s housing market decline is ‘no longer just a Sun Belt story’—LA and Dallas are tumbling, too

May 26, 2026 - 23:39

A sharp downturn in the American housing market is no longer confined to the pandemic boomtowns of the Sun Belt. According to a major new forecast, price drops are now spreading to major coastal and inland markets, with Los Angeles and Dallas emerging as the latest cities to see significant declines.

The shift marks a notable expansion of the housing correction. Earlier this year, most of the weakness was concentrated in overheated markets like Austin, Phoenix, and Boise. Those cities saw prices surge during the pandemic and then fall as mortgage rates climbed. Now, the pain is spreading to larger, more expensive metros that had previously held up better.

Los Angeles, long considered a stable market due to its supply constraints and high demand, has seen home values slip as rising rates crush affordability. Dallas, which benefited from a massive influx of new residents and corporate relocations, is now experiencing its own pullback as buyers retreat.

The broader geographic weakness, combined with a persistent mortgage rate shock that has pushed borrowing costs above 7 percent, has prompted one leading economic forecasting firm to slash its outlook for 2026. The firm now expects home prices to fall nationally by a larger margin than previously projected, with the correction lasting deeper into the decade.

Analysts point to a simple problem: too many sellers and not enough qualified buyers. Even with some price cuts, monthly payments remain near all-time highs relative to income. The result is a market that is freezing up, with existing home sales at multi-decade lows.

While some hope that the Federal Reserve will cut rates later this year, forecasters warn that any relief may be slow to arrive. For now, the housing downturn is becoming a national story, not just a regional one.