Rising mortgage rates cooled home prices this summer, with more metros posting negative three-month price momentum.
- National home price growth remained modest in July, rising 1.4% year over year.
- The Midwest and Northeast continued to lead appreciation, topped by Connecticut and Illinois (both 6.8%), Indiana (5.3%), New Jersey (5.0%), and Nebraska (4.9%).
- Annual price declines were concentrated in Texas (-0.8%) and parts of the West, including Colorado (-0.7%), Washington (-0.4%), and Hawaii (-0.2%).
Cotality, a leader in property information, analytics, and data‑enabled solutions, released its Home Price Index™ with July 2026 data. Home price growth increased by 1.4% year-over-year.
August data reinforces the existing regional divides between markets. Underneath the modest national price gains, Cotality data shows the full story with nuance. Across the U.S., an increasing number of metros are cooling even in areas that previously demonstrated resilience.
While the Sun Belt continues to see weak growth, pockets of the Northeast — which have remained stubbornly resilient to price declines — are beginning to show signs of a shift. Philadelphia posted the sharpest drop in annual momentum among top markets, falling 2.3 percentage points from June. Still, price decreases are concentrated in the western areas of the U.S., with powerhouses like San Francisco recording a 2.6% drop in prices over the last three months. San Jose also experienced one of the sharpest three-month price drops.
The largest three-month declines remain concentrated in the West, including San Jose, CA; Austin, TX; Bakersfield, CA; and Everett, WA. This suggests elevated prices, buyer fatigue, and uncertainty around AI-fueled wealth gains are weighing heavily on higher-priced markets.
Pockets of appreciation do still exist. Connecticut and Illinois saw the largest annual home price growth at 6.8% followed by Indiana (5.3%), New Jersey (5.0%), and Nebraska (4.9%). Prices in the Northeast continue to rise generally, due to very few homes coming onto the market and a lack of new construction.
At a more local level, some areas are bucking state-level trends. Abilene, TX, continues to lead the nation with a 13.3% year-over-year increase supported by local AI-related investment — and the wages that come with it.
“While prospective buyers may feel squeezed by volatile mortgage rates, slower home price appreciation should gradually help ease affordability pressures—especially if wage growth remains consistently stronger,” said Dr. Selma Hepp, Cotality’s Chief Economist. “As we move through the remainder of the year, local labor market dynamics and affordability constraints will continue to shape housing market performance as much as broader macroeconomic shifts, especially the direction of mortgage rates,” added Dr. Hepp.
Cotality predicts the dynamics of local economies will define the nation’s fractured housing market while mortgage rates remain elevated.
Top Takeaways:
- U.S. single-family home prices increased by 1.4% year over year in July 2026 compared with July 2025. On a month-over-month basis, home prices increased by 0% from June 2026.
- Cotality’s forecast shows annual U.S. home price gains increasing by 2.0% year-over-year in July 2027.
- Following four months of the highest year-over-year home price increases in the nation, San Francisco had an abrupt turnaround in signals, with a 1.4% decrease in prices month over month this July.
- Among states, Connecticut and Illinois saw the most annual growth in July, increasing by 6.8%. It was followed by Indiana (5.3%), New Jersey (5.0%), and Nebraska (4.9%).
- 19 metros posted negative three-month price momentum in July, up from 10 in June.
- The top markets at risk for price declines in the next 12 months, according to Cotality’s Market Risk Indicators include: Buffalo-Cheektowaga, NY; Cambridge-Newton-Framingham, MA; Providence-Warwick, RI-MA; St. Petersburg-Clearwater-Largo, FL; and Worcester, MA.
- The metros identified as having the highest risk of home price declines are concentrated in the Northeast, where affordability has deteriorated significantly relative to local incomes. As local incomes have failed to keep pace with rising home values, these markets have become more vulnerable to price corrections.
We want to note Cotality’s models for the HPI forecast have been updated from HPIF v 4.6 to HPIF v5.0, incorporating enhancements designed to improve forecast accuracy and better reflect current housing market dynamics. As a result, forecast estimates may differ from those published in prior releases. The next Cotality Home Price Index will be released on October 6, 2026, featuring data for August 2026. For ongoing housing trends and data, visit the Cotality Insights blog: www.cotality.com/insights.
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