U.S. Home Price Growth Slows as Mortgage Rates and Regional Risks Weigh

U.S. home prices are still rising on an annual basis, but September’s monthly decline and Cotality’s forecast point to a market losing momentum. Single-family prices increased 1.7% year over year in September 2026, then fell 0.3% from August. Cotality expects annual appreciation to slow to 0.9% by September 2027, roughly half the current rate.

The national median price remained above $400,000. That level, paired with mortgage rates above 7%, leaves many buyers facing high financing costs even as price growth cools. The difference between annual and monthly readings matters: the yearly increase reflects gains accumulated over the past 12 months, while September’s decline offers a more immediate signal of easing price pressure.

“Elevated mortgage rates are expected to limit home buying opportunities in 2027,” said Dr. Selma Hepp, Cotality’s chief economist. She said additional inventory and greater buyer bargaining power should keep price growth subdued and improve affordability. In her view, demand is likely to hold up better in regions with solid economic prospects, retirees moving in, and homes that remain comparatively affordable.

Regional performance splits sharply

The national figure masks substantial differences between markets. Illinois led state-level appreciation at 6.9% year over year, followed by Rhode Island at 6.4%, Connecticut at 6.0%, New Jersey at 5.1%, and Ohio at 4.9%. Cotality links stronger gains in parts of the Northeast and Great Lakes to persistent shortages of homes for sale.

Several states recorded annual declines: Washington fell 1.0%, Wyoming dropped 0.7%, Texas declined 0.4%, and Hawaii slipped 0.1%. These results illustrate how markets that previously ran hot can respond differently when supply builds, affordability tightens, or local employment weakens. Areas with fewer listings may keep prices firmer, while markets with more available homes can give buyers greater room to negotiate.

Recent price acceleration has appeared in Cleveland, Albany, Providence, Greensboro, and St. Louis, according to Cotality. The firm points to relative affordability, job growth, population inflows, and wages that are better aligned with home values as factors supporting these markets. By contrast, Augusta, Austin, Seattle, San Jose, and Washington, D.C., are among the metros cooling fastest, amid buyer pullback, rising inventory, and affordability pressure.

These patterns have consequences beyond prospective buyers and sellers. Homeowners may see equity continue to rise in stronger markets while having less flexibility to borrow against it where prices flatten. Buyers may gain negotiating power as listings accumulate, but elevated borrowing costs can offset some of the benefit of slower price growth. For people holding residential property through public or private investment vehicles, softer home appreciation also complicates assumptions about returns, particularly as rents are falling.

Appreciation can coexist with downside risk

Cotality’s Market Risk Indicators assess the probability of price declines across more than 400 metropolitan areas. The model currently identifies Buffalo-Cheektowaga, Cambridge-Newton-Framingham, Providence-Warwick, Tacoma-Lakewood, and Worcester as the metros with the highest risk of a price reduction exceeding 10% over the next 12 months. Each market receives a score from 1 to 100 based on economic conditions, housing supply, and valuations relative to longer-term fundamentals.

The presence of Providence-Warwick among both markets with recent acceleration and those carrying the highest modeled downside risk captures an important tension: rapid appreciation doesn’t eliminate the possibility of a correction. Prices that have moved ahead of underlying conditions may be exposed if financing costs remain high or employment weakens. The model describes a risk, not a certain outcome, and its estimates depend on the inputs and assumptions Cotality uses.

For advisers and property owners assessing housing alongside other assets, the national slowdown is only one part of the picture. Local supply, wage growth, employment, and buyer affordability can produce very different outcomes under the same broad mortgage-rate environment. A market can post strong past gains and still face elevated risk if home values have stretched beyond local fundamentals.

Cotality’s next Home Price Index, covering October 2026, is scheduled for release on December 1, 2026. That update will show whether September’s monthly decline marks a broader cooling pattern and whether the regional divide continues to widen.