Home Values Have Been Falling in Real Terms for 15 Months — Yet Buyers Still Can’t Afford Them

The average U.S. home is becoming less expensive in inflation-adjusted terms, but it remains out of reach for many buyers. National home values increased 2.1% in the year ended August 2026, according to the S&P CoreLogic Case-Shiller index, while consumer inflation was running at 3.4%. That means home values have declined in real terms for 15 straight months.

Five days earlier, ATTOM released its third-quarter affordability report. It found that homes were less affordable than their historical averages in 570 of the 583 counties it examined, or about 98%. In 467 counties, or 80.1%, the estimated monthly cost of owning a median-priced home exceeded the affordability benchmark based on typical local wages.

Buyers have been told for years to wait until prices come down, but that logic no longer works well. The cost of borrowing has become the main obstacle, overtaking home prices themselves as the factor limiting affordability.

Lower Prices, Higher Financing Costs

ATTOM said the national median home price fell 2% year over year, from $375,000 to $368,000. Its calculation assumes a 20% down payment and includes property taxes and insurance in the mortgage payment. On a 30-year loan, even a small rate increase can erase savings from a price cut of that size.

Borrowing costs moved in the opposite direction. The 10-year Treasury yield, which mortgage rates generally track, stood at 4.99% on October 27, up 0.98 percentage point from a year earlier. It reached 5.31% on October 5 after dropping to 3.97% in late February. The price reduction was modest, but the interest expense rose sharply for anyone who delayed buying in hopes of a better deal.

Income gains offer only limited relief. Average hourly private-sector earnings rose to $37.81 in September, about 3.0% higher than $36.70 a year earlier. That increase is slightly faster than home prices, but wages do not determine mortgage rates; the bond market does.

Housing Supply Is Still Tight

Builders are easing back. Housing starts fell to an annualized pace of 1.22 million in September, down 7.4% from a year earlier. Existing-home sales ran at a 3.99 million annual rate, down 2.2% year over year and still well below the 4.5 million level typically associated with a healthy market. With fewer homes changing hands, inventory stays thin and prices remain supported even as demand weakens.

Regional figures from the Federal Housing Finance Agency show how uneven the market remains. Home prices in Brunswick-St. Simons, Georgia, dropped 4.9% over the past year, while Boulder, Colorado, declined 2.26%. Austin was up only 0.34%. Over a longer horizon, some markets still show strong gains, including Atlantic City, which has risen 68.91% over five years.

Who Feels the Pressure Most

First-time buyers are bearing the brunt, and renters hoping to move into ownership are feeling the squeeze as well. Homebuilders are next in line. Incentives, smaller homes, and price cuts can keep sales flowing, but they also reduce margins. Mortgage lenders and home-improvement retailers depend on turnover, and that turnover has slowed.

The 10-year yield is the key figure to watch. If it falls back toward the sub-4% range seen in late February, lower real home prices could finally translate into smaller monthly payments. ATTOM’s fourth-quarter county count would likely narrow as well. If the yield stays near 5%, another quarter of real price declines may do little for affordability, and attention will turn to the next Case-Shiller reading. The August index had already slipped 0.2% from July, an early sign that weak demand may be beginning to push nominal prices lower too.