Cotality's August Home Price Index reveals annual gains masking a deeply divided US housing market
US single-family home prices rose 1.8% year-over-year in August, a modest acceleration from July's 1.6% gain, according to Cotality's Home Price Index. But the marginal uptick obscures a market fracturing along regional and rate-sensitivity lines.
On a month-over-month basis, prices slipped 0.1% from July. More telling is September's signal: Cotality reported measurable buyer pullback in pending home sales following August's mortgage rate spike.
The firm now forecasts month-over-month price declines through winter and projects full-year 2026 home price appreciation at just 1.3%.
Northeast and Midwest lead as Sun Belt softens
Illinois posted the strongest annual gain among all states at 6.8%, followed by Connecticut at 6.3%, and Indiana and New Jersey at 5.6% each. Alaska rounded out the top five at 5.1%.
In total, 21 states, concentrated in the Northeast and Midwest, hit new price-growth records in August, supported by limited supply and relatively affordable entry points.
Three states recorded negative annual price growth: Washington at -0.4%, and Texas and Hawaii each at -0.7%.
Negative three-month price momentum spread to 31 major metropolitan areas, up from 19 in July, a widening signal of late-summer cooling.
San Francisco captured both realities at once: a 7% year-over-year gain paired with -2.7% three-month momentum.
A new report from Clever Real Estate found that home prices in all 50 of the largest US metro areas exceeded inflation between 2011 and 2026, with Miami leading the way at nearly 344% growth. https://t.co/NGEm4grL2E
— Mortgage Professional America Magazine (@MPAMagazineUS) September 30, 2026
Rates will drive 2027, not affordability alone
Dr. Selma Hepp, chief economist at Cotality in Irvine, California, said rate expectations are the single biggest variable heading into next year.
"Looking ahead to 2027, mortgage rates will be the primary driver of home price trends and sales activity," she said.
"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. Elevated rates and ongoing affordability challenges will favor markets with lower entry prices and strong local job growth over former high-growth pandemic hotspots."
Cotality projects annual appreciation recovering to 1.6% by August, a step up from the 1.3% projected to close out 2026, and broadly in line with analyst forecasts on the 2026 US housing market correction and buyer outlook.
Markets at the highest risk of price declines over 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.
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