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AEI Housing Center Reports U.S. Home Price Growth Slows to 1.1%, Projects Future Declines

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U.S. Home Price Growth Hits Decade Low, Regional Shift Underway

A new report projects modest national price declines through 2028, with former hotspots in the South and West cooling while several Midwest and Rust Belt cities see gains.

According to data from the American Enterprise Institute (AEI) Housing Center, U.S. home price appreciation has slowed to its lowest rate in over a decade. The institute projects modest price declines will continue through 2028. The data reveals a significant regional shift, with former high-growth markets in the South and West experiencing price decreases while several cities in the Midwest and Rust Belt record gains.

Current Market Snapshot and Projections

U.S. housing prices increased by just 1.1% in the twelve months ending in February. This is the slowest annual rate of appreciation since the AEI began collecting data in 2012.

The AEI projects that the year-over-year price trend will turn negative in early April. Their forecast indicates that by the end of 2026, average single-family home prices will be 1% lower than at the start of the year. Further declines of 2.0% are projected for both 2027 and 2028.

Regional Price Performance

The report tracks 53 major metropolitan areas. Key findings for the period from February 2025 to February 2026 include:

  • Price Declines: 28 of the 53 areas saw price decreases. All major metropolitan areas in Florida, California, and Texas recorded declines.
  • Price Increases: 25 areas saw price increases, with gains concentrated in the Midwest and Rust Belt.

Metropolitan Areas with Largest Price Declines:

  • Cape Coral, Florida: -9.6%
  • North Port, Florida, Memphis, Tennessee, Tucson, Arizona, and Palm Bay, Florida: Declines ranging from -3.8% to -6.1%

Metropolitan Areas with Largest Price Increases:

  • Kansas City: +8.6%
  • Cleveland: +5.9%
  • Pittsburgh: +5.8%
  • Milwaukee: +5.6%
  • Grand Rapids, Michigan: +5.1%

Other cities with increases included Louisville (+3.4%), Chicago (+4%), and Philadelphia (+4%).

Market Conditions and Supply

The report states that 43 of the 53 cities tracked have over seven months of housing supply, a level the AEI associates with a buyer's market. The institute notes a significant increase in supply in southern and western markets, including:

  • Miami: Nearly one year's worth of inventory.
  • Austin, Texas; Tampa, Florida; and Houston, Texas: Each approaching eight months of supply.

Historical Context

AEI data provides the following historical context for home price appreciation (HPA):

  • 2013 to early 2020: Annual HPA was consistently between 5% and 7%.
  • 2020-2022 Surge: Following Federal Reserve interest rate cuts, mortgage rates fell from approximately 4.6% in late 2018 to 2.6% at the start of 2021. By early 2022, annual HPA reached approximately 18%.

During the peak growth period from the fourth quarter of 2019 to the second quarter of 2022, several Sun Belt and Western cities saw substantial price increases:

  • Austin: Increased from $297,000 to $593,000 (+100%)
  • Dallas: Increased from $264,000 to $432,000 (+64%)
  • Phoenix: Increased from $293,000 to $470,000 (+60%)
  • Miami: Increased from $350,000 to $450,000 (+50%)
  • Las Vegas: Increased from $308,000 to $448,000 (+45%)

During the same period, several Midwestern cities saw more moderate gains between 25% and 33%, including Minneapolis, Cleveland, Louisville, St. Louis, and Kansas City.

Analysis from AEI Co-Director

Ed Pinto, co-director of the AEI Housing Center, provided analysis cited in the report:

  • Pinto stated that markets which declined most in the past year are likely to continue that trend. He attributed this to elevated home prices combined with current mortgage rates in the 6.5% range, which are nearly double the below-3% rates seen from mid-2020 to early 2022, reducing affordability for buyers.
  • He noted that high homeownership costs relative to rental costs can exert downward pressure on housing prices following a surge.
  • Pinto described a shift toward what he termed an "affordability economy," with homebuyers looking to live in more affordable cities, benefiting markets in the Midwest and East.
  • Regarding former high-growth markets, Pinto stated, "Eventually, once the hotspots are back to more normal levels, they'll come to the fore again because people want to move there."