Overview:
- National single-family home price growth reaccelerated modestly in August, rising 1.8% year-over-year compared to 1.6% in July.
- Severe inventory shortages driven by sub-4% mortgage rate lock-ins and lack of new construction kept strong year-over-year gains in Illinois (6.8%), Connecticut (6.3%), with Indiana and New Jersey (5.6%).
- Condominiums and townhomes rose by only 0.1% year-over-year, reflecting persistent drag from rising HOA assessments and insurance costs.
National home price growth
August 2026 data
Source: Cotality
Affordability meter
Source: Cotality
Insights from Chief Economist Dr. Selma Hepp
The U.S. housing market modestly reaccelerated in August 2026, with single-family home prices, including distressed sales, rising 1.8% year over year. This is a small increase from the 1.6% annual pace in July and marks the fifth consecutive month of reacceleration. However, August's data largely reflects transactions with mortgage rate lock-ins before the late-August mortgage rate surge.
Although annual price gains have accelerated, the modest monthly decline of 0.1% in August stands in sharp contrast to the pre-pandemic average increase of 0.3% for the month. This continued sluggishness underscores how higher homebuying costs are dampening buyer demand.
Following the sizable increase in mortgage rates since August, the housing market has continued to weaken, with buyer pullback evident in September’s pending home sales. This trend is reflected in the Cotality HPI forecast, which projects month-over-month price declines through the winter and lower annual gains. Overall, annual appreciation for 2026 is expected to reach 1.3%. Beneath this headline figure, however, the real estate landscape remains deeply divided due to persistent rate-lock constraints, shifting migration patterns, and localized inventory imbalances.
The core trend shaping today’s market is the shift away from the once-booming Sunbelt and West Coast cities toward more affordable, inventory-constrained regions in the Midwest and Northeast. Despite a spike in 30-year fixed mortgage rates, buyers continue to seek markets where prices fit traditional debt-to-income ratios. Limited housing supply in these areas is sustaining prices. Conversely, markets with rising inventories, added construction, and slowing job and population growth are still searching for a price bottom. In many of these locations, higher mortgage rates have further discouraged buyers. Overall, the housing market now reflects two distinct realities across the country.
“The national housing market shows a clear split between short-term sensitivity to interest rates and long-term supply shortages,” notes Cotality’s Chief Economist, Dr. Selma Hepp. “High mortgage rates continue to suppress transaction volumes, but severe inventory constraints in the Midwest and Northeast are insulating home prices from broader declines and fueling localized appreciation.”
However, many of the top 100 metropolitan areas are seeing a clear slowdown in 3-month momentum. For example, while San Francisco, CA posted a strong 7.0% year-over-year gain in August 2026, its 3-month momentum turned negative at -2.7%, indicating a sharp late-summer cooldown.
A significant structural divide is persisting between property types. In August 2026, single-family detached homes rose 2.1% year-over-year, while attached properties like condos and townhomes increased by only 0.1%. This widening gap underscores how well-capitalized buyers continue to favor spacious, detached homes, while the condo sector struggles with rising HOA fees, special assessments, and higher insurance premiums.
Geographically, the Midwest and Northeast remain at the forefront of year-over-year price growth. Illinois led all states with a 6.8% annual price gain, trailed by Connecticut (6.3%), Indiana (5.6%), New Jersey (5.6%), and Ohio (4.8%). In these regions, a persistent lack of for-sale listings and limited new construction have fueled competition for available homes, keeping sale prices elevated despite broader economic challenges.
In contrast, major Sunbelt and West Coast markets are grappling with rising inventory and affordability challenges. Texas saw a year-over-year price decline of 0.7%, Washington fell 0.4%, and Hawaii dropped 0.7%. States such as Colorado (+0.1%), Oregon (+0.3%), Arizona (+0.5%), and Nevada (+0.7%) posted nearly flat annual growth. In these regions, increased new-construction completions and buyer resistance to high monthly payments have helped rebuild inventory and ease price pressures.
Over the next 12 months, national home price growth is expected to remain modest, with the Cotality HPI forecasting a 1.7% year-over-year increase by August 2027. State-level projections indicate the Midwest will continue to outperform, while previously overvalued Sunbelt markets are likely to stabilize as mortgage rates gradually decline.
“Looking ahead to 2027, mortgage rates will be the primary driver of home price trends and sales activity. Many buyers halt their searches when rates exceed 7%, but as expectations shift from lower rates in 2027 to ‘higher for longer,’ some may opt to buy rather than keep waiting. Although, elevated rates and ongoing affordability challenges will favor markets with lower entry prices and strong local job growth over former high-growth pandemic hotspots,” says Dr. Hepp.
Top 10 hottest markets
Source: Cotality
Top 10 coolest markets
Source: Cotality
Which areas are affordable?
Tracking the top 5 highest and lowest U.S. median sales prices
Source: Cotality
Markets to watch
Tracking markets with a very high risk of price decline in the top 100 CBSAs
Source: Cotality
High-risk market home price trends
Source: Cotality
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