JPMorgan’s nationwide home price forecast hides a Sun Belt full of pain. Watch out, Florida and Texas

Supply and demand in the housing market will combine to keep home prices flat this year as President Donald Trump’s efforts to improve affordability barely move the needle, according to JPMorgan Global Research.

In a year-ahead forecast published Jan. 27, analysts said price growth will stall at 0% in 2026 after nearly doubling over the past decade, with a slight improvement in demand likely neutralizing a supply uptick.

Helping buyers is an expected dip in adjustable-rate mortgages as the Federal Reserve continues to lower borrowing costs later this year, even as the 30-year fixed rate stays above 6%. On top of that, homebuilders will keep offering rate buydowns to lower mortgages to clear unsold inventory.

“We think this could be enough, along with a rising wealth effect, to shift demand higher while supply increases subside,” John Sim, head of securitized products research at JPMorgan, said in the note.

A year of prices holding steady would mark further slowing after prospective buyers balked at stubbornly high prices last year, while more owners started putting their homes up for sale. The muted demand forced some sellers to pull their listings off the market or slash their asking prices.

According to the Federal Housing Finance Agency’s most recent data, home prices in November were up 1.9% from a year ago, down sharply from 4.8% annual growth in October.

But in regions where housing supply grew the most during the pandemic-era construction boom, home prices are in outright decline. JPMorgan said prices are falling quickest on the West Coast and in the Sun Belt.

While the bank didn’t mention Texas and Florida specifically in its note, those states have seen particular weakness. Builders rushed to add new supply as Americans relocated there from higher-cost cities. But now that overhang is weighing on those market. According to Zillow, Texas home prices are down 2.4% from a year ago, and Florida home prices are down 5.1%.

JPMorgan also estimated that the overall U.S. housing market has a shortfall of about 1.2 million homes, though that is well below the consensus view as supply has grown in recent months. And looking back over the past 30 years, housing completions have essentially matched household formation.

“Overbuilding is a sure path to home price declines, and builders have been navigating an increasing supply of new homes,” Sim added.

Trump: ‘I want to drive housing prices up’

JPMorgan only sees gradual improvement in home sales this year as Trump’s efforts to make housing more affordable fail to have much impact.

He has proposed a ban on institutional investors purchasing single-family homes in the hope that first-time buyers will face less competition. But JPMorgan pointed out that such a ban “is unlikely to be a game-changer,” noting that institutional investors only account for 1%–3% of the market. In addition, many institutional investors have gotten into homebuilding to supply the rental market.

“If the proposed ban also prevents these large operators from building their own homes or communities, we believe this could potentially have the opposite effect and theoretically tighten overall supply, as it would prevent more rental homes from entering the market,” said Michael Rehaut, head of U.S. homebuilding and building products research at JPMorgan.

To bring down mortgage rates the reduce borrowing costs, Trump also directed Freddie Mac and Fannie Mae to buy up to $200 billion in mortgage-backed securities.

JPMorgan noted that the $200 billion purchase represents just 1.4% of the $14.5 trillion mortgage market and could cut rates by 10-15 basis points at most. In fact, while the intervention briefly lowered rates, they went back up a few weeks later.

“Secondly, most homebuilders already offer potential buyers mortgage rate buydowns of 100 bp to as much as 200 bp below the prevailing mortgage rate,” Rehaut added. “As a result, we do not believe a modest lowering of the market mortgage rate will have a material impact on demand.” 

Meanwhile, Trump has signaled unwillingness to take any action that would lower home prices and actually prefers to send prices higher.

During a Cabinet meeting on Jan. 29, he said many people have seen their wealth rise in the last year due to their homes appreciating, adding that home values will fall it buying homes becomes too easy and cheap.

“I don’t want to drive housing prices down. I want to drive housing prices up for people that own their homes, and they can be assured that’s what’s going to happen,” Trump said.

This story was originally featured on Fortune.com