U.S. Home Prices Rose Again, Keeping Affordability Under Pressure

U.S. home prices rose again in the second quarter, adding to the affordability pressure facing buyers even as the pace of appreciation remained modest, according to data released August 25 by the Federal Housing Finance Agency.

FHFA said its national house price index increased 2.1% from the second quarter of 2025 to the second quarter of 2026. Prices rose 0.3% from the first quarter of 2026, while the seasonally adjusted monthly index was unchanged from May to June.

The figures measure changes in single-family home values through a seasonally adjusted, purchase-only repeat-sales index based on mortgage transactions involving Fannie Mae and Freddie Mac. The index is not a direct measure of the full housing cost burden faced by households.

Price gains varied widely across the country

FHFA reported annual price increases in 46 states and the District of Columbia. Alaska recorded the strongest appreciation at 8.3%, followed by Vermont at 7.3%, Hawaii at 5.8%, Illinois at 5.6% and West Virginia at 5.6%.

Prices declined in four states. New Mexico posted the largest decline, at 1.2%.

Among the 100 largest metropolitan areas, prices rose in 76 during the four quarters ending in the second quarter. Elgin, Illinois, led with a 7.7% increase, while Everett, Washington, recorded the largest decline at 3.7%.

The regional spread matters for buyers and sellers. A 2.1% national increase does not mean every market is moving in the same direction, and local conditions can differ substantially from the national result.

Mortgage rates and limited supply add to the strain

The price data arrive as borrowing costs and resale conditions continue to limit the number of households able or willing to enter the market.

Associated Press reported that existing-home sales fell 1.7% in July from June to a seasonally adjusted annual rate of 4.06 million homes. The median existing-home price rose 2% from a year earlier to $434,100. AP also reported that Freddie Mac’s benchmark 30-year fixed mortgage rate reached 6.69% the previous week, its highest level in just over a year.

Inventory remained below pre-pandemic levels. There were 1.54 million unsold homes at the end of July, equal to a 4.6-month supply at the current sales pace. A 5- to 6-month supply is commonly viewed as a more balanced market.

That combination can keep prices supported even when sales are weak: buyers face high monthly payments, while some owners remain reluctant to list because they hold lower-rate pandemic-era mortgages.

First-time buyers remain especially exposed

First-time buyers accounted for 29% of July sales, down from 33% in June and below the roughly 40% share typical in more normal conditions, AP reported.

For households trying to enter the market, the challenge is the combined effect of the purchase price and the loan cost. Slower home-price growth does not necessarily restore affordability when borrowing rates remain elevated and buyers must finance a large purchase.

The latest FRED reading provides a separate affordability measure. The fixed-rate Housing Affordability Index stood at 103.3 in July 2026, compared with 101.8 in June. FRED says a value of 100 means a family earning the median income has exactly enough income to qualify for a mortgage on a median-priced home, assuming a 20% down payment. The measure describes mortgage-qualification conditions for a typical family; it does not capture every household’s circumstances, including different down payments, credit profiles, taxes, insurance or local costs.

What to watch next

FHFA’s next monthly house-price report, including data through July, is scheduled for September 29, 2026. The next quarterly report, covering the third quarter and September monthly data, is scheduled for November 24, 2026.

For buyers, the key signals will be whether mortgage rates ease, more owners list homes and existing-home sales move meaningfully above the roughly 4-million annual pace that has persisted in recent years. Until those conditions improve, slower price growth alone may not be enough to restore broad affordability.

Sources

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