National Home Prices Lose Momentum – Markets Recalibrate
CNBC has recently been covering the shift in the national real estate market as of late. After several years of surging appreciation, U.S. home prices are now showing clear signs of cooling—and in some markets, outright declines. Daily reads from Parcl Labs, which analyzes high-frequency listing data for single-family homes, condos, and townhomes, show that home prices have finally dipped below last year’s levels, though only fractionally. Prices are down less than 1% year over year and are 1.4% lower over just the last three months, signaling a softening trend heading into 2026.
This marks the first national year-over-year decline since mid-2023, a year after the Federal Reserve began lifting rates off their pandemic-era floor. From March 2022 through June 2023, the average 30-year fixed mortgage rate jumped from 3.9% to over 7%, creating what Parcl Labs co-founder Jason Lewris calls an “affordability shock.” Demand fell, sales volumes contracted, and sellers were forced to reset expectations. Historically, that combination—tight credit, weakened demand, and more inventory than buyers can absorb—sets the stage for broader price declines.
Not 2008—but Not the Frenzy of 2020–2022
Despite the recent declines, today’s environment is nowhere near the deep crash of the Great Financial Crisis, when home values dropped 27% between 2006 and 2012, according to the S&P Case-Shiller Index. But the market is clearly cooling after the pandemic-era run-up. Inventory remains historically low, but active listings in November rose nearly 13% from a year earlier, according to Realtor.com, even though new listings increased just 1.7%. Many homeowners are choosing to pull their properties off the market rather than sell into softer conditions.
This cooling is uneven across the country.
Markets with notable annual declines:
- Austin: –10%
- Denver: –5%
- Tampa & Houston: –4%
- Atlanta & Phoenix: –3%
Markets still posting gains:
- Cleveland: +6%
- Chicago & New York City: +5%
- Philadelphia: +3%
- Pittsburgh & Boston: +2%
Builders Feel the Strain as Rates Stall
The lack of government housing data due to the ongoing shutdown has clouded visibility into construction trends, but builder earnings tell a consistent story: demand remains fragile. Incentives continue, and homebuilder sentiment remains deep in negative territory.
“We continue to see demand-side weakness as a softening labor market and stretched consumer finances contribute to a difficult sales environment,” said Robert Dietz, chief economist for the NAHB. After a decline in single-family starts this year, the NAHB expects only a slight rebound in 2026.
Mortgage rates, meanwhile, have barely budged in the past three months and showed almost no reaction to the Federal Reserve’s latest rate cut—leaving little impetus for price growth.
Lewris expects a subdued landscape ahead: “Our base case is not a deep national downturn, but a period where prices hover around zero—small positive or negative year-over-year changes—rather than the double-digit gains of the pandemic era.”
Homeowners Start to Lose Equity
The softening is already hitting homeowner balance sheets. According to a new report from Cotality, borrower equity fell 2.1% in Q3 compared with a year earlier, representing a collective loss of $373.8 billion. This marks the first meaningful erosion after years of massive gains.
Even with the decline, homeowners still hold $17.1 trillion in collective net equity on mortgaged homes—but the distribution of those gains is shifting.
For the average homeowner, the equity drop translates into a loss of $13,400 year over year.
Perhaps more concerning:
- The number of homes in negative equity rose 21% in the last year, now totaling 1.2 million properties.
- These underwater owners are largely buyers who purchased recently—when rates were elevated and prices were near peak levels.
- Some stretched buyers used piggyback loans or minimal down payments to qualify, making them more vulnerable as values flatten.
“As markets recalibrate from pandemic peaks, we’re seeing a clear shift in equity trends,” said Selma Hepp, chief economist at Cotality. “Negative equity is on the rise, driven in part by affordability challenges that led many first-time and lower-income buyers to over-leverage.”
5 Years of Gains Still Cushion Most Owners
Home values are still 52% higher than in January 2020, according to the S&P Cotality Case-Shiller index. Even with the rate spike in 2023, homeowners saw an average equity gain of $25,000 that year; in 2024, gains slowed to $4,900.
Regional disparities continue:
Markets still seeing positive equity trends: Boston, Chicago, New York
Markets with the largest equity losses: Los Angeles, San Francisco, Washington, Miami, Houston
Looking ahead, Hepp warns that the stability of highly leveraged borrowers depends on broader economic conditions. “The future performance of these loans will hinge on the strength of the U.S. economy and labor market,” she said.
The Bottom Line
The U.S. housing market is entering a new phase—not a crash, but a cooling.
- Prices are flattening.
- Equity growth is slowing or reversing.
- Mortgage rates remain elevated.
- Builders face weak demand.
- Markets are diverging sharply by region.
Most homeowners still stand on a cushion of pandemic-era price appreciation, but newer buyers and highly leveraged households face growing risks. With mortgage rates locked in their current range and economic uncertainty ahead, a sustained period of “near-zero” price movement is increasingly likely—marking a dramatic shift from the volatility of the past four years