Higher rates and the lock-in effect sustain a supply-demand stalemate as the Northeast and Midwest pull ahead
US home prices rose 1.4% year over year in August, keeping national appreciation below its nearly three-decade pre-pandemic historical average of 3.4% for the 17th consecutive month, according to the Home Price Index (HPI) report released Monday by First American Data & Analytics.
Month over month, prices edged up just 0.2%. That's a number that underscores a housing market pinned between restrained demand and artificially compressed supply.
"Nationally, home price growth is not too hot and not too cold, but it is not quite right for a housing market still seeking balance," said Mark Fleming, chief economist at First American Data & Analytics, based in Santa Ana, California.
"Higher mortgage rates are weighing on demand, while the mortgage-rate lock-in effect continues to limit supply. For now, that stalemate is keeping home price growth steady, but subdued."
Despite sluggish appreciation, prices in August remained approximately 80% above their pre-pandemic five-year average for the month.
High mortgage rates are forecast to keep the US housing market subdued through 2026, with the 30-year fixed rate projected to hold between 6.1% and 6.3% through year's end, per the Mortgage Bankers Association (MBA).
A market divided by region
Chicago led all Core-Based Statistical Areas (CBSAs) with a 5.5% annual gain, followed by Hartford, Conn. (+5.3%), New York (+5.2%), Milwaukee (+4.8%), and Cleveland (+4.3%).
Strength in the Northeast and Midwest reflects tight resale inventory, with the lock-in effect holding discretionary sellers off the market.
Sun Belt and Western metros are correcting in the opposite direction. Dallas posted the steepest annual decline at -5.0%, followed by Austin, Texas (-3.4%), San Antonio (-2.9%), Tampa, Fla. (-1.9%), and Denver (-1.9%).
"These declines reflect a broader market rebalancing after years of rapid growth," Fleming said.
"Although price declines can be difficult for homeowners, they may help improve affordability and create a healthier path back toward balance for buyers and sellers."
MBA chief economist Mike Fratantoni previously noted that mortgage rates have more than doubled from their post-pandemic low and that home prices are up more than 50% from pre-pandemic levels — a dual constraint that continues to squeeze first-time buyers out of most major metros.
Edward Seiler of the Mortgage Bankers Association says monthly mortgage payments eased in August as smaller loan sizes helped offset higher rates, although affordability continues to vary significantly across markets.https://t.co/PdtWg8gCic
— Mortgage Professional America Magazine (@MPAMagazineUS) September 25, 2026
Where starter home growth is holding firm
This month's report expands First American's coverage to the top 50 CBSAs for the first time, including price tier data segmenting markets into starter, mid and luxury tiers.
The results show the strongest entry-level momentum concentrated in the Midwest. Cleveland led with a 5.5% annual gain in the starter tier, followed by Philadelphia (+5.3%), Milwaukee (+5.2%), Grand Rapids, Mich. (+5.1%), and Pittsburgh (+5.0%).
Melissa Cohn, regional vice president at William Raveis Mortgage in New York, told Mortgage Professional America earlier that "2026 has gotten off to a better start than we've seen, and the pace is better than what we've seen in the past few months" — a read that holds in the Northeast and Midwest markets, even as Sun Belt metros correct.
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