U.S. single-family home prices rose 1.7% year-over-year in September 2026, according to Cotality's Home Price Index but the monthly reading told a more cautious story, with prices sliding 0.3% from August as elevated mortgage rates continued to suppress buyer activity.
The national median price remained above $400,000, according to Cotality, the Irvine, California-based property information and analytics firm. The data signals a market losing momentum even as it technically advances. Cotality's forward-looking model projects annual home price appreciation will slow to just 0.9% by September 2027, roughly half the current pace.
"Elevated mortgage rates are expected to limit home buying opportunities in 2027," said Dr. Selma Hepp, chief economist at Cotality. "However, more inventory and greater buyer bargaining power will keep home price growth subdued, improving affordability. Market activity will favor regions with solid economic prospects, regions that attract retiring population and offer affordable homes."
For those already navigating the tension between rising home equity and tightening liquidity with mortgage rates topping 7%, the Cotality data adds another layer of complexity to real estate conversations. The forecast of near-flat price growth through 2027 may shift how advisors frame housing as an asset class - particularly for clients weighing property against other long-term investments.
The September 2026 data reinforced a persistent regional divide that has defined the U.S. housing landscape throughout this cycle.
Chronic inventory shortages in the Northeast and Great Lakes continued to drive outsize gains: Illinois led all states at 6.9% annual appreciation, followed by Rhode Island at 6.4%, Connecticut at 6.0%, New Jersey at 5.1%, and Ohio at 4.9%, per Cotality's report.
At the other end of the spectrum, prices contracted in several markets. Washington state fell 1.0% year-over-year, Wyoming dropped 0.7%, Texas slid 0.4%, and Hawaii posted a 0.1% decline. The divergence reflects structural differences - former boom markets dealing with excess supply and job losses, while inventory-constrained metros in the Midwest and Northeast hold firmer.
According to Cotality, metro areas showing recent acceleration include Cleveland, Albany (New York), Providence (Rhode Island-Massachusetts), Greensboro (North Carolina), and St. Louis (Missouri-Illinois). These markets share characteristics that tend to support price stability: relative affordability, job growth, population inflows, and wage levels better aligned with local home values.
The fastest-cooling metros tell the inverse story. Augusta (Georgia), Austin (Texas), Seattle, San Jose, and Washington, D.C., have all seen buyer pullback, inventory build-up, and affordability strain that is pushing prices lower.
Housing signals in 2026 have turned increasingly mixed for real estate investors as home prices hold steady at the national level while rents fall at their fastest clip in years. That dynamic is reshaping return assumptions for clients with exposure to residential real estate, whether through direct ownership or through public and private real estate investment vehicles.
Cotality's Market Risk Indicators, which scores the probability of price declines across more than 400 metropolitan areas, currently flags the following markets as carrying the highest risk of a price reduction exceeding 10% over the next 12 months: Buffalo-Cheektowaga (New York), Cambridge-Newton-Framingham (Massachusetts), Providence-Warwick (Rhode Island-Massachusetts), Tacoma-Lakewood (Washington), and Worcester (Massachusetts). The model assigns each metro a probability score between 1 and 100 based on economic conditions, housing supply, and valuation relative to long-term fundamentals.
That risk concentration in the Northeast - the same region leading on appreciation - is a reminder that strong price growth and elevated downside risk are not mutually exclusive. Markets where values have outpaced fundamentals remain vulnerable to correction if mortgage rates stay elevated or employment softens.
As the debate over whether 2026 is the right moment to buy a home continues, the question is not simply whether prices will rise or fall, but whether housing still earns its place in a diversified long-term portfolio when mortgage rates remain above levels that make the math work for most buyers.
Cotality's next Home Price Index, covering October 2026 data, is scheduled for release on December 1, 2026.
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