The spring homebuying season is underway, but the numbers underneath the surface are telling a different story than the one many sellers were hoping for. According to the latest data from Cotality, formerly CoreLogic, annual home price appreciation slowed to a marginal 0.5% in February 2026, the weakest reading in years. More significant is the regional breakdown: 13 states are now recording negative year-over-year home price changes. Washington, D.C. and South Dakota top the list with declines of approximately 3%, and they are not alone. The affordability ceiling that economists have been warning about for two years has finally arrived, and its effects are uneven across the country.
The states experiencing price declines share a common thread. Many saw some of the sharpest price increases during the pandemic-era housing boom and are now correcting as buyers pull back. Elevated mortgage rates, which climbed to 6.46% this week on the 30-year fixed, have priced out a significant portion of would-be buyers, and sellers are feeling the shift. Active listings jumped nearly 8% nationally in February compared to a year earlier, and 43 of the 50 largest metro areas had more homes for sale than the same time last year. In many markets, listings are up between 10% and 38.5%. Median sale prices have now fallen below listing prices in several regions, a clear sign that buyers are regaining negotiating power.
The Midwest and Northeast are providing the strongest buffer for the national index. New Jersey posted the highest annual price increase at 5.93%, followed by Illinois at 4.83%. These markets benefited from relatively affordable price points compared to coastal cities, and they attracted buyers who were priced out of more expensive metros during the pandemic migration. The Midwest in particular has seen steady demand driven by affordability and job stability in sectors less exposed to the tech and finance layoffs that have rattled other regions. But even in these stronger markets, the pace of appreciation is slowing, and agents report that buyers are more cautious than they were six months ago.
The Iran conflict and its impact on oil prices have added another layer of uncertainty. Gas prices sitting at $4.11 nationally and mortgage rates at a seven-month high have combined to create a consumer confidence problem. A CNBC survey of real estate agents released this week found that 37% said time on the market was their sellers' top concern, up from 30% at the end of last year. Sellers are also reporting that buyers are submitting offers with more contingencies and requesting concessions at higher rates than during the seller-dominated market of 2023 and 2024. The power dynamic is shifting, and it is happening faster in some markets than others.
For buyers who can qualify at current rates, the spring market may actually be more favorable than the past several years. More inventory, fewer bidding wars, and seller willingness to negotiate on price and closing costs are all working in the buyer's favor. The challenge remains affordability in absolute terms. Even with prices declining in 13 states, the combination of elevated rates and still-high prices relative to incomes means monthly payments remain out of reach for many households. First-time buyers continue to be squeezed, and the share of all-cash purchases remains elevated as investors and downsizers dominate portions of the market.
The regional divergence is the most important trend to watch in the coming months. If price declines in states like D.C., South Dakota, and parts of the Sun Belt accelerate while the Midwest holds steady, the national average will mask two very different realities. Homeowners in declining markets may find themselves underwater sooner than expected, particularly those who purchased at peak prices with minimal down payments. Homeowners in stable markets may not feel any impact at all. The housing market is not one market. It is hundreds of local markets with different supply dynamics, different employment bases, and different exposure to the economic headwinds of 2026.
The next major data point comes with the March CPI report on April 10, which will provide additional clarity on whether inflation is cooling enough to give the Federal Reserve room to cut rates later this year. A rate cut would change the math for millions of prospective buyers sitting on the sidelines. Until then, the 13-state decline is a signal that the post-pandemic housing boom is officially over in parts of the country, and the correction that follows will not look the same everywhere.