Prices Are Still Too High — And 2026 Could Be Worse
Housing didn’t break because of fear.
It broke because the math stopped working.
That distinction matters — because when the math breaks, prices don’t just stall… they eventually have to correct.
Let’s walk through why housing affordability is still deteriorating, why prices haven’t fully adjusted yet, and why 2026 could be the year the system finally gives way.
1. We Live in a Payment Economy — And Payments Exploded
The single most important metric in housing is monthly payment, not actually price.
Since 2000, the average 30-year mortgage payment sat comfortably between $1,200–$1,500.
Then 2022 happened.
When the Fed started raising rates, monthly payments spiked from roughly $1,600 to over $3,000 in a matter of months. Even after some pullback, payments remain historically extreme.
That’s a 62% increase in shelter costs in just 2–3 years.
And here’s the problem:
Consumers are already maxed out.
Credit cards
Student loans
Auto loans
Insurance
Taxes
There is very little elasticity left in household budgets.
This is why the next generation is not buying, regardless of what headline prices say.
2. Housing Is Illiquid — Prices Adjust Slowly
Real estate does not reprice like stocks.
It takes time.
We saw this in 2006–2012. Prices didn’t collapse overnight — they drifted lower as transactions froze and sellers slowly capitulated.
Looking at inflation-adjusted home prices going back to 1890, one thing is clear:
Today, prices are well above the 2008 peak, even after adjusting for inflation.
That doesn’t mean we crash tomorrow — but it does mean the math is unsustainable.
3. Renting Is Now Cheaper Than Buying — By a Lot
This is the most important chart in housing right now:
It is cheaper to rent than to buy in most markets.
Why would a buyer:
Take on maintenance
Pay HOA, taxes, insurance
Absorb price risk
…when they can rent the same home for $700–$1,000 less per month?
That difference is life-changing money for first-time buyers.
Historically, buying made sense because ownership was cheaper.
That relationship has flipped — and housing freezes when that happens.
4. Rents Are Falling — And That Breaks the Entire Model
Here’s the part many people miss:
Rents are already coming down.
Examples:
Austin: -21%
Fort Myers: -18%
Phoenix: -13.5%
Raleigh: -12.5%
Jacksonville: down nearly 10% from peak, with some areas over 20%
When rents fall, the entire affordability equation collapses.
Prices must adjust downward to restore equilibrium.
By my math, prices need to fall 30–40% from peak to make buying rational again at current rates.
5. Builders Overbuilt — Especially in the Sun Belt
Builders assumed:
Migration would continue forever
Rates would stay low
Demand would remain insatiable
They were wrong.
We are now at 2009-level new home inventory.
Even more important:
New homes are now cheaper than existing homes in many markets.
That inversion almost never happens.
Builders are cutting prices, paying closing costs, offering incentives, and in many cases selling entire communities to build-to-rent operators.
If you own an existing home, you’re now competing directly with brand-new inventory — and that puts downward pressure on resale prices.
6. The Next Buyer Problem No One Wants to Talk About
Here’s a brutal stat:
Empty nesters own 28% of large homes
Millennials with kids own 14%
So who buys the next wave of listings?
Empty nesters want to downsize — but:
They face capital gains taxes
Higher mortgage rates
Qualification issues if retired
Millennials can’t afford the payments.
This creates a transaction freeze, not because people don’t want to move — but because they can’t.
7. First-Time Buyers Are Disappearing
First-time buyers used to represent ~50% of the market.
Today?
They’re in the low 20s.
That’s a massive red flag.
A healthy housing market requires new buyers to enter the system.
When they disappear:
Prices stagnate
Liquidity dries up
Corrections follow
8. Delinquencies Are Rising — Quietly
Another warning sign:
FHA delinquencies nearing 12%
Auto loan delinquencies rising
Credit card defaults climbing
Home equity extraction slowing sharply
Home equity has been the consumer ATM for years.
That ATM is closing.
And when equity stops flowing, economic velocity slows with it.
9. Can the Government Hold This Together Through Midterms?
This is the political reality:
Housing represents ~66% of the average American’s net worth.
A falling housing market is toxic for elections.
So governments intervene:
Talk of assumable mortgages
50-year loans
Buying mortgage-backed securities
Rate manipulation
But here’s the problem:
Lower rates without lower prices does not fix affordability.
It just props up prices temporarily.
If rents keep falling, intervention becomes ineffective.
10. What Happens Next?
My base case:
Prices in Florida decline 31–42% from the 2022 peak (according to my math)
Timeline is uncertain
Regional outcomes vary
Sun Belt markets are most vulnerable
I do expect sales velocity to increase later this year — not because housing gets healthy, but because sellers finally capitulate.
For buyers:
You must negotiate aggressively
Protect yourself from downside risk
Do not assume prices always go up
Buying real estate is expensive — often 10% round-trip in costs alone.
This is not a decision to rush.
Look forward to hearing from you — what are you seeing out there?
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e: jon@movewithmomentum
