The ‘affordability economy’ has created a housing market nobody predicted: Prices collapsing in the Sun Belt, soaring in the Rust Belt
U.S. housing is experiencing a historic “reversion to the mean.” In other words, the formerly sizzling metros have gone cold, and the unsexy plodders are back in vogue. That point comes through vividly in the new market snapshot just released by the highly influential American Enterprise Institute Housing Center. The AEI data, compiled by co-directors Ed Pinto and Tobias Peter, shows that housing prices nationwide edged up a puny 1.1% in the twelve months ended in February, the slowest rate of appreciation since the AEI started collecting numbers at the start of 2012. (The think tank started reporting the year-over-year changes in 2013.) It gets worse: The AEI is projecting that for the first three weeks of April, the trend will go negative, and by the end of this year, single family houses on average will be fetching 1% less than at the start of 2026, with drops of 2.0% to come in both 2027 and 2028. Obviously, those numbers are trailing the current course of the CPI, so the the lesser dollars you’d get selling your house in 2028 would take a second hit from today’s high inflation.
Those startling stats mark a stunning reversal from the post-pandemic boom. From 2013 to early 2020, home price appreciation (HPA) consistently registered at between 5% and 7%. Then, the Fed supplied the rocket fuel by slashing interest rates, sending mortgage costs plummeting from around 4.6% in late 2018 to 2.6% at the start of 2021. Prices took a moonshot as buyers could pay much more for the house and still comfortably make the monthly payment due to the bargain home loans. By early 2022, HPA was roaring at an annual tempo of roughly 18%, triple the pre-pandemic number.
The bounty flowed mostly to the Sun Belt and a suite of glamorous western cities, notably Denver, Seattle, Portland and Boise. Florida, Texas and California led the way. According to the AEI figures, from Q4 of 2019 to Q2 of 2022 when the upswing peaked, Las Vegas average prices went from $308,000 to $448,000 (+45%), Miami from $350,000 to $450,000 (+50%), Phoenix from $293,000 to $470,000 (+60%), Dallas $264,000 to $432,000 (+64%), and Austin from $297,000 to $593,000 (+100%). By comparison, the Rust Belt, and the Midwest overall, lagged behind, after already trailing at a far slower pace in the pre-pandemic days. In that fabulous span for the sprinters of the south and west, Minneapolis, Cleveland, Louisville, St. Louis and Kansas City each gained only between 25% and 33%.
From Cape Coral to Kansas City, America’s housing market is undergoing a historic reversion to the mean—and the data couldn’t be more striking.
The AEI report features tables displaying the five metros that have registered the highest HPA from February of 2025 to February of 2026, and the cities that have fared worst. You could almost cut and paste the “best” performers from February of 2022 into the current “worst” column, and vice versa. Topping the laggards: Cape Coral, Fla. at a 9.6% drop, followed by North Port, Fla., Memphis, Tucson, and Palm Bay, Fla., all between -3.8% to -6.1%. The biggest winner was Kansas City at +8.6%; Pittsburgh (+5.8%) and Cleveland (+5.9%) also made the top five.
All told, 28 out of America’s 53 largest metros saw price decreases through February, including all in Florida, California and Texas. The entire Rust Belt as a bloc made the plus column as Louisville rose 3.4%, Grand Rapids 5.1% and Milwaukee 5.6%. Stalwarts such as Chicago and Philadelphia (each +4%) that never got pricey to begin with are now reaping the benefits of being shunned in the pre-pandemic world.
The report notes that a big increase in supply is pummeling the south and west. Forty-three of the 53 cities are carrying over seven months of supply, meaning at the current rate of sales, it would take that many months for everything listed to find a buyer. That ‘for sale’ level is considered the lowest tier for a buyers’ market, meaning that eight in ten metros, shoppers have gained the edge. Among the most swamped: Miami at almost a year’s inventory, and Austin, Tampa and Houston all approaching eight months.
It’s likely that the markets that shrank most in the past year will continue to lead the downdraft. “We’ll see more of the same,” says Pinto. The reason: Prices in places like Cape Coral and Phoenix flew so high that those sunny locales became unaffordable for a broad swath of buyers, especially first-timers. The sharp drop in mortgage rates to below 3% from mid-2020 to early 2022 enabled folks to pay big numbers for their ranch or colonial and not cut back on dining out or cutting short the trip to Disney World. Now, the former hotspots are suffering from a confluence of still elevated prices, and home loans that are almost twice as expensive in the 6.5% range. Put simply, prices must fall still further in these metros for shoppers to cover the monthly nut. Another issue: The costs of owning a house in a Cape Coral or Memphis simply got too high versus choosing an apartment, and over time, rental costs exert a kind of gravitational pull on housing prices, yanking them earthward following a big surge.
“Eventually, once the hotspots are back to more normal levels,” says Pinto, “they’ll come to the fore again because people want to move there. The Sun Belt is always going to be the Sun Belt.”
Meanwhile, the Midwestern and eastern cities are witnessing a level of buying and home price appreciation they haven’t enjoyed in many years. “Homebuyers are looking to live in these more affordable cities,” says Pinto. We’ve entered the “affordability economy.” The housing tide is shifting, and for now, the edge has gone to the stodgy old-timers.
This story was originally featured on Fortune.com