The U.S. housing market is losing momentum, but the slowdown is anything but uniform in September 2026.
Cotality’s latest housing data show a national market increasingly divided along regional and financial lines. Home-price growth remains positive overall, yet more metropolitan areas are posting monthly declines. Sales and pending contracts have weakened as mortgage rates moved higher, while a growing share of buyers are abandoning contracts before closing.
At the same time, homeowners remain insulated by historically large amounts of accumulated equity. That wealth is limiting the potential for a broad wave of distressed sales even as affordability deteriorates. For borrowers who bought during the pandemic-era rate trough, however, refinancing remains largely unattractive, helping explain renewed interest in adjustable-rate mortgages.
Here are 10 developments shaping the U.S. property market this month.
1. The national housing market looks stable–until the regional data are examined
U.S. home prices rose 1.4% from a year earlier in July, according to Cotality. But the national figure masks a widening divergence among metropolitan markets.
Of the 100 largest U.S. metros, 46 recorded monthly price declines in July, up from 28 in June. Nineteen had negative three-month price momentum, nearly twice June’s 10.
The pattern reflects the growing influence of mortgage rates, affordability and local housing supply. Markets with limited inventory–particularly in parts of the Northeast and Midwest–are continuing to support prices, while areas with greater housing supply and weaker affordability are showing more pronounced cooling. Cotality said mortgage rates rising from about 6% in the spring to more than 6.6% since June helped cool demand.
2. San Francisco is showing signs of a sharper turn
Some of the country’s most expensive markets are beginning to lose momentum.
San Francisco’s annual price growth remained strong in July, but its shorter-term trend deteriorated materially, according to Cotality. The shift illustrates an increasingly important feature of the 2026 market: annual price statistics can remain positive even after a market has begun to weaken on a monthly or quarterly basis.
That distinction is particularly important in high-cost markets, where buyers are more exposed to mortgage rates, property taxes, insurance and other ownership expenses.
The Bay Area also demonstrates how quickly market conditions can change. Earlier in the year, Cotality had identified San Francisco as an exception to broader Western weakness, with technology-related wealth supporting demand.
3. The Northeast and Midwest are becoming the country’s price-growth engine
The strongest price appreciation is increasingly concentrated in markets where supply remains constrained and relative affordability is better than in the country’s most expensive coastal markets.
Cotality’s July data put Connecticut and Illinois at the top among states, with annual gains of 6.8%, followed by Indiana at 5.3%, New Jersey at 5.0% and Nebraska at 4.9%. Texas, Colorado, Washington and Hawaii were among states recording annual declines.
The divergence reflects more than simple geography. Buyers facing high borrowing costs are increasingly sensitive to the relationship between income and home prices, while markets with limited resale inventory can maintain price pressure even as transaction activity slows.
4. Home sales have begun to retreat after a stronger first half
The deterioration is becoming visible in transaction volumes.
After running ahead of 2025 levels through the first seven months of the year, U.S. home sales weakened sharply in August, according to the latest Cotality analysis. Pending contracts had already begun responding to higher mortgage rates, declining year over year in July and again in August.
Other market data point in the same direction. Redfin reported that U.S. home sales fell 4.1% in July from the prior month, reaching their lowest seasonally adjusted level in almost two years, while pending sales also declined.
The timing suggests that the spring improvement in financing conditions did not survive the subsequent rise in mortgage rates.
5. Texas and Seattle are carrying much of the transaction slowdown
The weakness in sales is concentrated in several large metropolitan areas rather than spread evenly across the country.
Texas markets have been particularly soft as buyers benefit from a relatively large selection of homes following years of construction. Cotality’s figures show significant annual declines in the state’s major markets, while Seattle has also experienced a substantial pullback.
Redfin similarly reported sharp annual declines in sales in San Antonio, Dallas, Fort Worth and Seattle, with pending transactions particularly weak in Seattle, Houston and Phoenix. The Seattle market has also been affected by uncertainty surrounding the region’s technology employment base.
By contrast, some large markets–including New York–have remained comparatively resilient.
6. More buyers are walking away before closing
One of the clearest signs of financial pressure is the rise in canceled transactions.
Cotality estimates that nearly 12% of contracts signed in June had not closed by the 60-day mark in August, the highest August share in five years. The rate was 1.3 percentage points above August 2025.
The increase matters because a canceled contract can remove a transaction that otherwise would have appeared in closed-sales data. Cotality estimates that cancellations may have accounted for at least one-third of August’s decline in completed sales.
Higher mortgage rates are an important factor. Buyers who entered contracts before rates moved higher can find that the financing available at closing no longer fits the economics they expected when making the offer.
7. Large housing investors are returning to the market
Institutional investors that own at least 1,000 homes sharply reduced their purchases after federal policymakers began considering restrictions on large-scale acquisitions of single-family properties.
Their share of single-family purchases fell to about 1.4% in February, from 2.7% in December, according to Cotality. By August, the share had recovered to roughly 2.2%.
The rebound comes after the 21st Century ROAD to Housing Act became law on July 11. The law includes restrictions on purchases of single-family homes by large institutional investors, subject to specified exceptions.
Cotality’s data suggest that at least some institutional buyers may have delayed activity while the regulatory environment was uncertain. Whether the August increase represents a lasting return remains an open question.
8. Homeowners have an enormous equity cushion
The most important counterweight to the housing slowdown is household balance-sheet strength.
U.S. homeowners with mortgages held an estimated $17.9 trillion in aggregate home equity in the second quarter, while total homeowner equity exceeded $34.9 trillion. Average equity for a homeowner with a mortgage reached approximately $310,000, according to Cotality.
Only about 2.1% of mortgages were underwater. Cotality estimates that home prices would need to fall substantially before the share of underwater borrowers returned to levels associated with the aftermath of the financial crisis.
That equity cushion changes the character of the current slowdown. A market with falling transactions and weaker price momentum does not necessarily translate into widespread forced selling when most homeowners have substantial equity in their properties.
9. The refinancing market remains largely frozen
For most existing homeowners, today’s mortgage rates offer little incentive to refinance.
With 30-year mortgage rates hovering around the upper-6% range, the overwhelming majority of borrowers still hold loans originated at materially lower rates during the pandemic-era financing boom.
Cotality’s July analysis shows how powerful that lock-in effect remains: only a small fraction of outstanding mortgages carry rates high enough for a conventional rate-and-term refinance to make financial sense at current market rates.
The result is a market in which homeowners are sitting on substantial equity but are reluctant to disturb exceptionally cheap mortgages. That dynamic continues to restrict resale inventory and contributes to the unusual combination of high home prices, limited supply and weak transaction volumes.
10. Adjustable-rate mortgages are becoming an affordability tool again
As fixed mortgage rates remain elevated, adjustable-rate mortgages are attracting a larger share of borrowers.
Cotality data show conventional ARMs gaining ground in August, reaching levels not seen since the aftermath of the 2022 rate shock. The increase is particularly relevant for buyers purchasing expensive homes, where a lower initial ARM rate can materially reduce the monthly payment compared with a 30-year fixed mortgage.
The resurgence marks a notable shift in borrower behavior. ARMs had become a relatively small part of the U.S. mortgage market during the long period of historically low fixed rates. Now, with affordability stretched and fixed rates near 7%, some buyers are again accepting adjustable-rate exposure in exchange for a lower initial payment.
Cotality previously documented particularly strong ARM usage in high-cost markets, including California, where ARMs represented more than 31% of mortgage originations in 2025.
The Bigger Picture
The September housing market is not defined by a national crash–or by a return to the boom conditions of the early 2020s.
It is increasingly a two-speed market.
Homeowners who purchased before the rate shock generally have low-cost mortgages and substantial accumulated equity. Many have little reason to sell or refinance. That keeps existing-home supply constrained.
Prospective buyers face the opposite equation: home prices remain historically high, mortgage rates are elevated, and monthly payments are difficult to reconcile with household incomes. The result is weaker demand, fewer completed transactions and a growing number of contracts that fail to reach closing.
Geography matters just as much. Supply-constrained markets in the Northeast and Midwest are maintaining price growth, while several high-supply Sun Belt and Western markets are experiencing sharper adjustments.
The defining feature of the 2026 housing market, therefore, may not be the national price index at all. It is the growing divergence beneath it–between regions, between homeowners and prospective buyers, and between those holding low-rate mortgages and those entering the market at today’s borrowing costs.
For now, America’s housing market remains supported by homeowner balance sheets even as affordability increasingly constrains the next generation of transactions.
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