This is the third installment in my Tale of Two Markets series, and I'm writing it because I got a lot of great questions after the last one. People asked me to define some of the terms I'd been throwing around — so let's slow down and actually define them, because they explain almost everything happening in housing right now.
Here's the big picture: the United States doesn't have one real estate market in 2026. It has two. The Southwest, the Sunbelt, and the West are in what's being called a resetting market. The Northeast and the Midwest — where I work — are still a heated, refuge market. Same country, two completely different stories.
What is a "resetting market"?
"Resetting market" is actually a phrase from Realtor.com — there's a whole article on it — and here's what it means.
The reset is about home prices in certain markets staying low enough, or stable enough, that affordability slowly repairs itself. Think about it: salaries tend to rise around 3% a year. If home prices in a region stay flat or even come down a little, then over time, that 3% raise quietly does the work. Your income catches up to the price of the house. Affordability stops being the wall it used to be.
I'd also call this a kind of value realignment. Affordability is the engine here — and it's the thing shifting the geographic center of real estate away from the pandemic darlings of the South and West, and back toward the Rust Belt, the Midwest, and the Northeast.
What is a "refuge market"?
This is the one that's personal for me, because my own towns are refuge markets.
I work in the small towns just west of New York City — anywhere from about 12 to 25 miles out (though I cover the rest of the state too). We are the refuge for people leaving the city. Look at the map: I've got three major metros pulling people my way — Jersey City and Hoboken, all of New York City and the boroughs, and Philadelphia to the south.
So you get a family sitting in the city saying, "I can't really afford this anymore. Where do I go?" And the answer is a town like mine — where you can still get a decent house with a little yard and a relatively easy commute to New York or Philly. High mortgage rates only sharpen that math: if staying in the city feels impossible, taking refuge in one of these towns becomes the obvious move.
Now — one important caveat. "Refuge" does not mean cheap. Don't confuse the two. We've seen significant price gains in these towns: 16% in one year, 10% in another. Even right now, we're still seeing roughly 4–6% gains in the best refuge towns near New York City. So even though the Midwest and Northeast are the "affordable" alternative on a national map, they're also, right now, the most competitive regions in the country — and the New Jersey refuge market I work in is right at the center of it.
The engine underneath it: equity migration
So how does an "affordable" region stay this competitive? One word: equity.
Picture a buyer who bought a place in the city ten years ago for $500,000. Today it's worth $1.7 million. They want more space, but they don't want to pay $2.3 million for a three- or four-bedroom condo in the city. So they do what I call equity migrating — they take the equity they built in the expensive metro and move it out to a refuge town.
It's happening in the suburbs outside Boston, outside New York, outside Chicago. Buyers are lifting their equity out of the high-cost metro and setting it down in a cute, quiet town where they can — quite literally — take refuge. And because they're arriving with real equity in hand, they can compete hard.
Why refuge towns keep getting more expensive
Here's the problem layered on top of all that demand: supply.
A lot of these towns simply don't have much new inventory. Even when you see renovations happening, there's often a net-zero gain in the number of homes — one house gets reworked, but no new home is added. So you've got a flood of priced-out buyers turning their attention to our towns, and almost no new supply to meet them.
High demand, very little new supply — that's why these "affordable" places are actually rising faster than the national average. My own town grew about 10% last year for the simplest reasons in the world: it's 14 miles west of New York City, the commute is easy, the schools are good, and you can get a nice house in a quiet town. Desirable plus scarce equals up.
Meanwhile, in the Sunbelt: the correction
Now flip over to the Sunbelt and the West, where the correction is playing out — because the affordability story there turned out to be more complicated than it looked.
For years people assumed the Sunbelt was simply cheap. The challenge was all the hidden costs of buying in Florida and across the South that didn't show up on the sticker price — and it's almost always the same two culprits: taxes and insurance. Fires, floods, hurricanes — skyrocketing homeowners insurance quietly turned "affordable" areas into unaffordable ones.
On top of that, builders flooded those markets with new construction over the past few years. Now that rates have climbed, a lot of buyers are backing away from new builds, partly because they keep discovering more of those hidden costs — including HOAs.
And HOAs are a real factor now. Remember the condo collapse in Miami? In its wake, a lot of states started forcing condo associations to run capital reserve studies — basically an engineering report. Here in New Jersey, communities have to do one every five years, and they're being asked to fund 30 years' worth of needed improvements over the next 10. That can mean a jump in HOA dues or a special assessment landing on the people living there now. More hidden cost, more pressure on "affordable" math.
The mortgage lock-in gap: why people aren't selling their home in 2026
I mentioned this in an earlier video and promised I'd come back to it — the mortgage lock-in gap. It's the single biggest reason people aren't selling their home in 2026.
One of the key metrics right now is whether there's a payment jump when you move from one home to another. It's the difference between your current mortgage payment and what your payment would be if you bought something new today.
In the Midwest and Northeast, you're looking at a potential average payment jump of roughly 30–45% — say you sell a smaller home and trade up because you need space. Unless you've really paid down your mortgage, going from a 2.75% rate to nearly 6% makes that leap intense. The saving grace here is equity: because people made so much on that first home or condo, they can pour it into the next one and keep the new mortgage manageable. But the jump is still there.
In the Sunbelt and the West, the leap is even steeper — an average payment jump of 70–90%. That's so expensive that homeowners just choose to stay put unless work forces a move. That lock-in is a big part of why we have an inventory problem in the Northeast and Midwest — people aren't listing, because moving means resetting their whole payment.
(One note: even with that big payment jump out West, the Sunbelt has so much inventory already — frankly, a lot of overbuilding — that the lock-in causes less of a supply crunch there than it does here.)
The takeaway: watch your local market
If this three-part series leaves you with one thing, let it be this: watch your local market closely, because it will behave very differently from the national headlines — and even from the town next door.
I'm serious about that last part. I have two adjacent towns that behave completely differently, simply because one has virtually no inventory and the other has a little. That difference decides whether you're fighting hard in a heated market or holding real leverage in a resetting one.
So please, work with a local professional who can tell you exactly which market your street is in. That's the difference between guessing and knowing.
If you have questions about your town — what it's doing, where it's headed, whether now is your moment to buy or sell — reach out. I'd love to help.
— Nancy Chu · Nancy Chu Homes · 917-992-3098
Watch the full video: Tale of Two Markets Part 3 | Resetting Market vs Refuge Market Explained
This wraps the three-part series. Catch up if you missed them:
Part 2 — Buy Below Median in New Jersey
