US home prices cool, boosting affordability—yet regional gaps and investor activity persist
United States homebuyers found some relief in August as home price growth slowed to its lowest pace in years, according to the latest Cotality Home Price Index.
Nationally, prices rose just 1.3% year-over-year, with the median home price dipping slightly to $400,000. While this marks a modest improvement in affordability, the most favorable since 2022, market dynamics remain highly uneven across the country.
Northeast outperforms as South and West falter
The Northeast continued to outpace the rest of the country, with metros like Bridgeport, CT; Newark and Camden, NJ; Rochester, NY; and Chicago, IL leading price growth among the top 100 markets.
“Northeastern states maintain strong housing fundamentals, which has led to continued home price growth in the high single digits,” said Dr. Selma Hepp, chief economist at Cotality.
In contrast, seven of the top 10 metros reporting negative growth were in Florida, with other declines concentrated in Washington D.C., Colorado, Hawaii, Arizona, Texas, and California. “Negative home price growth is dominating areas of the South and the West,” Hepp said.
US home price growth has slowed for the sixth straight month, with the S&P Case-Shiller Index rising only 1.7% Y/Y. This cooling, along with rising inventory, presents a complex calculus for the Federal Reserve’s next rate decision.https://t.co/vZXdcbjunH
— Mortgage Professional America Magazine (@MPAMagazineUS) September 30, 2025
Escrow costs and investor activity reshape affordability
Escrow costs have surged 45% over the past five years in states with negative price appreciation, driven by higher property taxes and insurance.
Meanwhile, investor activity remains elevated, accounting for roughly one-third of total home purchases, a trend expected to persist through the end of 2025. This shift is largely attributed to a decline in owner-occupied transactions, further complicating the path to homeownership for many.
Buyers regain some leverage, but uncertainty lingers
Improved affordability and a recent dip in mortgage rates have coaxed some buyers back to the market.
“Enhanced affordability has provided much-needed relief to the housing market, which has experienced limited momentum over the past two years,” Hepp said.
“Rising inventories are providing buyers with more choices while price cuts are now more common in certain local markets. This has slowly shifted negotiating power towards buyers—if they can afford to act. But, with some sellers pulling back and further expected decline in mortgage rates, price pressures could resurge.”
Still, the future remains uncertain. “The housing market remains at a crossroads—where mortgage rates, inventory shifts, local dynamics, and policy decisions converge,” Hepp said.
“Whether demand unlocks further or stalls will depend not just on market and economic fundamentals, but perhaps, most crucially, on consumer sentiment which remains fragile particularly when it comes to job security and financial prospects. Until buyers feel confident in both the market and their own financial footing, many will remain on the sidelines.”
The Cotality report reflects that of ICE Mortgage Monitor, in which affordability hits 2.5-year high. With 30-year mortgage rates averaging 6.26% in mid-September, the monthly principal and interest payment on an average-priced home dropped to $2,148, or 30% of the median US household income.
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