U.S. Home Price Growth Slows Further in March but Affordability Remains Challenged

Key Takeaways

National home price appreciation decelerated sharply, with the Case-Shiller National Index registering just 0.7% y/y in March versus 3.4% a year earlier. The slowdown, however, has been insufficient to offset the effect of rising mortgage rates since February; on net, affordability has deteriorated from early‑2026 levels. Constrained affordability continues to cap demand and sales, driving our 2Q residential investment tracking estimate down to 1.0% q/q annualized. Despite the near‑term drag, household balance sheets remain underpinned by home values still more than 50% above 2019 levels. Our housing strategists expect price growth to recover to 2% y/y by year‑end.

Evidence Chain

Price trends are softening across major indices. The FHFA purchase‑only index rose just 0.1% m/m (1.7% y/y), while the Case‑Shiller 20‑City Composite fell 0.2% m/m, bringing its y/y gain to 0.8%. The national index’s y/y rate has compressed by 2.7 percentage points over 12 months. Critically, cheaper price gains have not restored affordability: the post‑February backup in mortgage rates has more than erased any benefit from slower appreciation. As a result, affordability metrics have worsened relative to February, even though they remain above the worst levels recorded last year.

The affordability squeeze is transmitting directly to activity. Home sales volumes remain subdued, consistent with the 2Q residential investment pace of only 1.0% annualized. Yet the macro wealth channel remains intact. With home prices up over 50% from pre‑pandemic benchmarks, household net worth is still supported, cushioning consumption. Looking ahead, the housing strategy team expects a modest re‑acceleration to 2% y/y by December, implying that the current soft patch is largely a function of rates rather than structural supply or demand destruction.

Key Risks

A further rise in long‑end yields would push mortgage rates higher, intensifying the affordability headwind and potentially tipping residential investment into outright contraction. Conversely, a rapid rate decline—though not our base case—could quickly revive affordability and release pent‑up demand, driving stronger price and activity outcomes. On the macro side, stickier‑than‑expected shelter inflation could delay Fed easing, keeping financing costs elevated longer. A sharper‑than‑anticipated labor market downturn would pose downside risk to home prices, particularly in markets where inventory is already building.