Home values adjusted for inflation fell for the eighth consecutive month in January, as high mortgage rates, economic uncertainty, and affordability concerns continue to dampen the U.S. housing market.
The S&P Cotality Case-Shiller index, which tracks repeat sales of single-family homes, posted a 0.9% annual gain in January. That is 1.5 percentage points less than the consumer price index for the same period.
“Home prices are growing less than overall prices, less than wage growth, and that’s good,” said Stan Shipley, analyst at advisory firm Evercore ISI. “It is making home prices more affordable, but they got so expensive relative to incomes that it’s going to take a long time.”
The current plateau can be seen as a hangover from the red-hot market of the past years, as homeowners are loath to leave homes with mortgage rates below 3%, and the current high rates discourage first-time buyers.
Home prices would need to fall much farther to come down anywhere close to pre-pandemic levels. The Case-Shiller index rose 46% between 2020 and 2024, far outstripping inflation and income growth, as the stock market boomed and interest rates were low. Home prices remain sky-high relative to median incomes in most metro areas.
“With 30-year mortgage rates still near 6%, affordability constraints show no sign of easing,” Nicholas Godec, analyst at S&P, said in a statement. “Nominal prices are barely rising; in real terms, they are edging lower.”
Part of the regional differences can be seen as a leveling off after the pandemic-era housing boom. Many of the cities that are seeing the steepest declines, such as Tampa (-2.5% annual drop) and Denver (-2%), are ones that saw huge influxes of new residents. The cities that are coming out on top, including Chicago (4.6% annual gain) and Cleveland (3.6%), had weaker demand in the past years.
“People can’t move to Florida because they suddenly can’t afford it, so they’re buying in Cleveland,” said Shipley.
Many Sun Belt cities like Phoenix, Dallas and Tampa also built vast amounts of new housing as the market heated up. Some areas may have been overdeveloped and are now depressing prices as they struggle to sell their inventory.
“A place like Tampa, there are just too many new condos, it’s a bit cheap,” said Rob Beyer, a real estate analyst at Kingsland Capital. “Whereas a place like Palm Beach is never going to be a bad investment, even if returns are low right now.”
Some prime markets are still holding remarkably strong. Ellen Pack put her home in San Francisco’s Telegraph Hill on the market for $3.99 million in early March, even though two real estate agents had estimated its value at less than $2 million.
Only a few weeks later, the four-bedroom wooden house had two offers above asking price. She chose to sell to a Chinese businessman, who wanted to buy a home for his daughter in the tech industry and offered $4.2 million in cash.
Pack had purchased the home in the 1990s for $1 million, but had sunk about $2 million into renovations and upgrades over the course of living there. “Right now, I’m just relieved that it sold,” she said.
Another factor that isn’t dampening home prices is climate change. Rising insurance costs, especially in areas prone to flooding or fires, are making homeownership more expensive, but it has yet to significantly shift population patterns.
“People still want to live near the coast, near water,” said Shipley.
The main factor pushing down demand is simply mortgage rates, and if the Federal Reserve cuts interest rates in the second half of 2026, demand is expected to bounce back as well.