The Affordability Squeeze Is Back as Home Prices Fall Across Most Major US Cities

Home prices in the 20 largest US cities dropped 0.16% month-over-month in March, according to S&P Cotality Case-Shiller data. That was worse than the 0.10% decline analysts had forecast. Annual appreciation came in at just 0.83% year-over-year, the weakest reading since July 2023.

More than half of those 20 markets posted year-over-year price declines in March. Head of Fixed Income Tradables & Commodities at S&P Dow Jones Indices noted that this reflects "a broadening and deepening housing slowdown."

Geographic divergence in price trends

The regional split is sharp. Chicago led all cities with a 6.1% annual gain, followed by New York at 4.0% and Cleveland at 3.0%.

The Sun Belt and West performed at the opposite extreme. Seattle posted the steepest decline at -2.5% year-over-year, per the same report. Denver fell 2.0%, Tampa dropped 1.9%, and Dallas declined 1.7%.

Even Los Angeles and Washington DC turned negative in March. The gap between the top and bottom performers reached 8.6 percentage points, from Chicago's +6.1% to Seattle's -2.5%.

"Midwest and Northeast markets are sustaining modest growth, while much of the Sun Belt and Western regions are still seeing declines," Godec said.

Inflation outpacing home price gains

For the 10th straight month, inflation exceeded national home price appreciation. March's Consumer Price Index ran 2.6 percentage points above the 0.7% national home price gain, extending what has become a prolonged streak of negative real returns for homeowners.

That figure (0.7% annual gain at the national level) is the broader composite read, distinct from the 20-city index. Both measures point in the same direction.

Mortgage rates climbing again

The 30-year fixed mortgage rate dipped below 6% in late February before rebounding to ~6.4% by the end of March, per the Case-Shiller report. Since then, borrowing costs have climbed further.

For the week ending May 21, the average 30-year fixed rate hit 6.51%, the highest level since last August, according to Freddie Mac data cited by Newsweek. By May 25, Bankrate put the national average at 6.65%.

Rates are up 53 basis points over the 12 weeks leading to late May, according to Realtor.com senior economist Jake Krimmel. That move has kept a portion of potential buyers on the sidelines.

The recent climb is tied to the outbreak of the Iran war in late February, according to Redfin chief economist Daryl Fairweather. "Mortgage rates spiked, gas prices surged, and confidence cratered," Fairweather told Newsweek.

Coming into 2026, expectations had been for a stronger spring market than the year prior. Wages had grown faster than home prices, Fairweather noted. Rates were lower on a year-over-year basis. Inventory was finally loosening. The geopolitical shock reversed much of that setup.

What the summer market looks like

Despite the headwinds, some demand indicators held up. New listings in April hit their highest level since 2022. Contract signings in April were up 4.5% and reached their highest year-to-date level in four years, according to Krimmel.

"That's all coming despite rising mortgage rates, spiking inflation and gas prices, and the lowest consumer sentiment on record," Krimmel said.

The summer outlook, however, is more cautious. Fairweather described the coming months as likely characterized by "hesitation with pockets of activity." Buyers with fixed timelines (relocations, growing households) will transact. Discretionary buyers are expected to hold off and monitor how the Middle East situation develops.

More price cuts are likely in markets that were already softening, particularly across the South and parts of the West, Fairweather told Newsweek. Inventory could keep building as sellers who listed this spring stay on the market.

That rising supply gives buyers more negotiating power, though Fairweather was direct about what that actually means: "Buyer's market doesn't mean affordable. It just means you have more choices."

The path forward hinges primarily on the Iran conflict and its effect on oil prices and inflation. If conditions stabilize and the Federal Reserve resumes rate cuts, Fairweather says rates could drift back toward 6% or the low 6s by year-end. If they don't stabilize, rates could push back toward 7%.

Krimmel offered a more measured take on where buyers stand now. "Buyers aren't waiting for 3 percent again, they're finding ways to make 6 percent work," he said. "That's a noticeable shift from two years ago."