US Home Prices Tick Up, But the Market Is Really Three Different Markets

The headline number looks almost boring: U.S. home prices rose 0.8% year-over-year in May, nudging up from April's 0.6%. But that single figure — reported by Cotality — is doing a lot of heavy lifting, smoothing over a market that is fracturing along geographic, economic, and generational lines in ways a national average simply cannot capture.

The myth the data invites is a tidy one: that the housing market is either recovering or stalling, depending on which number you pick up. The reality, according to multiple data sources, is that both things are true simultaneously — in different zip codes.

MYTH: One number tells the story. The Cotality figure (0.8% annual appreciation), the FHFA's reading (2.2% year-over-year through May), and Realtor.com's median listing price (down 2.4% year-over-year to $429,500 — the steepest annual drop in at least nine years) are all measuring real things. They just aren't measuring the same thing. The FHFA tracks repeat sales of homes financed through Fannie Mae and Freddie Mac, capturing actual transaction prices. Cotality's index uses a broader repeat-sales model. Realtor.com tracks asking prices on active listings — what sellers want, not what buyers pay. When sellers are pricing more realistically from the start, as Realtor.com's data suggests, listing prices can fall even as transaction prices hold steady or rise.

Sellers are pricing to sell rather than pricing to test the market. Buyers, despite rates remaining higher than expected, are still showing up when prices are within budget.— Jake Krimmel, Senior Economist, Realtor.com

MYTH: The market is frozen. It isn't — it's just moving in slow motion and in different directions at once. According to Zillow, the average U.S. home value sits at $372,995, with homes going to pending in around 18 days. Roughly 28% of sales are still closing above list price, even as 52.4% close below it, according to Zillow data through May 2026. That's not a frozen market; it's a bifurcated one.

MYTH: The Midwest is just playing catch-up. What's happening in the affordable middle of the country is more structural than a simple catch-up trade. According to Cotality, Illinois led all states in year-over-year price growth at 5.9%, with Maine and Indiana both at 5.6%. The spring momentum in Midwest metros — Lake County, IN up 5.9% over three months, Milwaukee up 4.8%, Indianapolis up 4.7% — reflects a genuine migration of demand from high-cost coastal markets. Inventory growth has been concentrated in these mid-sized markets, which is simultaneously drawing buyers in and beginning to moderate those rapid gains.

The U.S. housing market in mid-2026 remains firmly entrenched in a geographic split, shaped fundamentally by an affordability gap and a wealth gap that continues to divide buyers across the nation.— Dr. Selma Hepp, Chief Economist, Cotality

MYTH: The Sun Belt bust is still happening. The correction in Austin and Florida markets that dominated headlines for the past two years appears to have largely run its course, according to Cotality. Austin is still down 2.9% year-over-year and Cape Coral-Fort Myers is down 3.3%, but their three-month price changes have stabilized at essentially zero — a signal that these markets have found a floor. Realtor.com's data adds nuance: Austin's median listing price has dropped 9.5% year-over-year, yet the market saw nearly 8% more sales through April 2026 than through April 2025, suggesting that lower prices are actually working to draw buyers back in.

MYTH: The San Francisco rebound is broad-based. It is not. According to Cotality, San Francisco posted 8.9% annual price growth — but a striking 7.6 percentage points of that occurred in just the last 90 days. This is not a market recovering evenly; it is a market being turbocharged by a specific cohort. As Cotality's Hepp notes, buyers insulated from mortgage rate volatility — those with substantial accumulated home equity and wealth gains from AI-era tech investments — are driving concentrated, rapid appreciation in a market that remains structurally undersupplied.

What we are witnessing is a profound segmentation of opportunity. Buyers who are well-insulated from mortgage rate volatility—bolstered by substantial accumulated home equity and robust wealth gains—are continuing to look at high-value regions like San Francisco, driving a strong near-9% annual rebound in a market that remains fundamentally healthy and structurally undervalued relative to long-term income baselines.— Dr. Selma Hepp, Chief Economist, Cotality

MYTH: California is in a class of its own and getting worse. California prices are extraordinary — mid-tier homes run about $775,000, more than twice the typical U.S. mid-tier home, according to California's Legislative Analyst's Office — but the trajectory has actually been flat since mid-2022. The LAO reports that California home prices are now roughly in line with where they would have been had they simply continued growing at their pre-pandemic rate of about 6% annually. The crisis isn't accelerating price growth; it's the gap between prices and incomes. Only about 22% of California households would likely qualify for a mid-tier home mortgage in 2026, down from 31% in 2019, according to the LAO.

MYTH: More inventory means lower prices are coming. Not necessarily. The lock-in effect — where homeowners with sub-5% mortgage rates have little financial incentive to sell into a 6%-plus market — continues to suppress the supply of existing homes in many markets. The LAO estimates that about 76% of California homeowners held mortgage rates below 5% as of March 2026. Nationally, new listings rose just 2.1% year-over-year in May, according to Realtor.com, and Cotality notes that new listings have actually decreased across the South and West. Inventory gains are concentrated in the Midwest, not the markets where affordability pressure is most acute.

The one genuine convergence in the data: the gap between the nation's strongest and weakest housing markets has narrowed to near-record lows compared to a year ago, according to Cotality — pointing toward a more synchronized national trend than the pandemic era's wild regional divergences. But synchronized does not mean uniform, and the defining fault line of this housing cycle — between equity-rich buyers who can absorb rate volatility and first-time buyers who cannot — shows no sign of closing soon.

Cotality's baseline forecast calls for national annual price appreciation to gradually move back toward historical averages over the next year. Realtor.com's Krimmel flags contract cancellations and delistings as the key stress indicators to watch heading into summer.

Why it matters — Whether you're trying to buy, sell, or simply understand your net worth, the market you're in matters far more right now than any national headline figure — and the gap between equity-rich and first-time buyers is widening, not closing.

Sources differ on Direction of U.S. home prices in May 2026: Up 0.8% year-over-year (transaction-based index) (cotality.com) vs Up 2.2% year-over-year (repeat-sales, agency-backed mortgages) (fhfa.gov) vs Down 2.4% year-over-year (median listing/asking prices) (realtor.com)

Reported by cotality.com, jpmorgan.com, zillow.com, fhfa.gov, advisorperspectives.com, realtor.com, census.gov, lao.ca.gov