New First American data shows rising borrowing costs are straining housing affordability without triggering a national price decline
Rising mortgage rates have long been framed as an automatic drag on home prices, but new data from First American Data & Analytics challenges that assumption.
The company’s August 2026 Real House Price Index (RHPI) – which adjusts nominal home prices for changes in income and mortgage rates to produce a real measure of affordability – found that real house prices fell 1.3% from a year earlier, signaling a modest improvement in affordability, even as the average 30-year fixed rate climbed to 6.67%.
Month over month, however, the index rose 1.2%. By September 2026, rates had crossed 7%, sharpening the pressure on prospective buyers.
First American chief economist Mark Fleming, based in Washington, DC, analyzed eight periods of rising mortgage rates since 1993 and found that national home prices generally continued to appreciate in each episode, though the pace and affordability impact varied considerably.
New data from the S&P CoreLogic Case-Shiller and Federal Housing Finance Agency (FHFA) showed continued home price growth in August, though affordability pressures remain as inflation and mortgage rates continue to weigh on buyers. https://t.co/tawpgNZrLV
— Mortgage Professional America Magazine (@MPAMagazineUS) October 27, 2026
What history reveals about rising-rate periods
The divergence between home price growth and housing affordability has been sharpest since the pandemic.
During the extended surge from December 2021 through October 2023, national prices rose approximately 14%, but the RHPI climbed more than 70% as higher borrowing costs compounded already-elevated prices.
Earlier episodes produced far less affordability damage even when prices grew at comparable rates. That pattern has continued into the present cycle, with First American data showing that affordability gridlock is keeping the US housing market barely moving in 2026, as existing-home sales continue to run below long-run historical norms.
Fleming has also pointed to income growth as central to the longer-term picture.
“An important dynamic for affordability is that household income is expected to rise faster than house prices next year,” he previously said.
“When income growth exceeds house price growth, house-buying power improves – even if mortgage rates don’t decline meaningfully.”
Supply dynamics explain much of the resilience. Homeowners who locked in low pandemic-era rates have been reluctant to list, constraining inventory even as buyer demand softens.
Mike Fratantoni, chief economist and senior vice president of research at the Mortgage Bankers Association (MBA) in Washington, DC, echoed that view in a 2026 forecast interview with Mortgage Professional America.
“I think the affordability situation is going to get moderately better over the next couple of years. We expect that wages are going to be growing faster than rents, and going to be growing faster than home prices. So that, in combination with mortgage rates staying stable, should make it slightly easier over time for folks to afford that housing payment,” he said.
Broker Samantha Shelton, president at Align Lending in the US, previously told Mortgage Professional America: “By 2026 I anticipate more inventory as rate-locked sellers regain confidence, steadier and more predictable buyer demand, wage growth continuing to help affordability and a balanced market that feels less volatile than recent years.”
What the lock-in effect means for brokers today
Supply dynamics remain central to why home prices have resisted rate pressure. Pandemic-era homeowners who secured rates well below 4% have been reluctant to sell, constraining inventory even as buyer demand softens.
Michael A. Harris, president and CEO of United Mortgage Corporation of America, said that the lock-in effect is shaping client behavior in ways that may not serve borrowers’ long-term interests.
“Rate lock-in continues to influence homeowner decisions, particularly among borrowers who secured mortgage rates below 4%. The challenge is that the decision is often being made based on the interest rate alone, rather than the homeowner’s complete financial picture,” he said.
Harris added: “Meaningful improvement requires a combination of better affordability, adequate inventory, realistic seller expectations, and financing solutions that fit borrowers’ actual needs.”
The August 2026 RHPI reveals a sharp regional divide. At the metro level, Syracuse, N.Y. posted the steepest year-over-year increase at 9.2%, ahead of Rochester, N.Y. at 7.7% and Milwaukee at 6.5%.
Baton Rouge, La. recorded the sharpest decline at -8.9%, while Colorado Springs, Colo. fell 7.5% and Seattle dropped 6.7%. Whether housing affordability in the US is truly improving in 2026 depends heavily on the local market.
Consumer house-buying power declined 1.1% between July 2026 and August 2026 but improved 2.6% year over year, as median household income rose 3.4% since August 2025.
National house price appreciation has slowed to approximately 1% annually, according to First American’s August 2026 data.
Fleming’s broader conclusion is one brokers will need to translate carefully for clients weighing a purchase decision in the months ahead.
"Slower appreciation and rising household incomes can help gradually improve affordability, although higher mortgage rates threaten those gains," he said.
"Higher mortgage rates can put pressure on home prices, but the economy, household incomes and the number of homes for sale all play a role in what happens next."
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