US Home Prices Gain 0.5% as 27% of Metros See Declines

The U.S. housing market posted a modest 0.5% year-over-year gain in median single-family home prices to $404,300 in the first quarter, but the headline number conceals a growing split as affordability pressures reshape local markets. While prices rose in 71% of metropolitan areas, the number of regions recording annual price declines expanded to 27%, according to a quarterly report from the National Association of REALTORS®.

"Home prices continued to increase in many markets, boosting housing wealth for most homeowners," NAR Chief Economist Dr. Lawrence Yun said. "However, the expensive West region did not see an increase in sales.”

The data reveals a deeply fragmented market. Gains were strongest in the Northeast and Midwest, which saw prices rise 4.9% and 3.6%, respectively, while the West saw a 2.9% decline. The number of metro areas with double-digit price gains increased to 16, even as the share of markets with any price growth slipped to 71% from 73% in the prior quarter.

This divergence underscores a market grappling with an affordability crisis. While the typical mortgage payment fell by $140 per month year-over-year to $1,979 in the first quarter, U.S. home prices remain roughly 48% higher than pre-pandemic levels. Compounding the pressure, an estimated 65% of homeowners are expected to face escrow shortages in 2026, pushing average monthly payments up by about $175 due to higher insurance and taxes, according to data from Cotality.

Seller Power Wanes

After years of dominance, sellers are beginning to lose leverage. Asking prices for new listings were down 1.1% year-over-year, data from Cotality shows, a sign that buyer resistance to high valuations is taking hold. This follows a period where prices are stabilizing after months of modest declines, with February posting a 0.04% gain and early March showing a 0.34% increase.

"Falling prices remain a drag for most move-up buyers, and a deterrent for first-time home buyers, behavioral economics delaying the ‘FOMO’ motivation that propelled housing demand, amid still low affordability,” said Kenneth Zener, a senior analyst at Seaport Research Partners.

Investors Retreat and Delinquencies Rise

Caution is also evident among investors. Purchases by investors accounted for 27% of single-family home sales in March, a slight decrease from a year earlier. Notably, large-scale investors have halved their market share, a potential signal of concern over future returns and regulatory pressures.

Meanwhile, signs of stress are emerging at the household level. Serious mortgage delinquencies ticked up to 1.14% in February, with loans backed by the Federal Housing Administration showing the most strain. The combination of high prices, rising ownership costs, and a cooling rental market suggests the market is in a prolonged recalibration rather than a sharp correction.

This article is for informational purposes only and does not constitute investment advice.