High mortgage rates are suppressing home sales, keeping many homeowners locked into older loans and widening regional price differences, while record home equity is reshaping borrowing and household wealth. The gap between today’s financing costs and the low rates many owners secured before 2022 continues to constrain supply, even as elevated borrowing costs weigh on affordability and activity.
New October 2026 analysis from property data firm Cotality, released this week shows that substantial homeowner equity has not produced a meaningful recovery in transactions. The timing and terms of a mortgage can also influence household wealth long after purchase.
Top 10 developments shaping the U.S. market:
1. National home-price growth remains modest, with sharp regional differences.
U.S. home prices rose 1.8% year over year in August, according to Cotality’s Home Price Index, up from 1.6% in July. Cleveland recorded 6.4% annual appreciation, supported by relative affordability and limited supply. Austin experienced a 2.1% decline amid higher inventory and cooling demand. National averages mask these local contrasts: constrained supply can sustain gains despite high rates, while greater inventory and affordability pressure weigh on other markets.
2. The Midwest and Northeast outperform parts of the Sun Belt.
Illinois home prices rose 6.8% annually and Connecticut 6.3%, while Texas prices declined 0.7%. Supply constraints continue to support values in parts of the Midwest and Northeast. In portions of Texas and other Sun Belt markets, greater availability and resistance to high monthly payments are putting downward pressure on prices. Local supply, affordability and demand increasingly determine performance rather than a uniform national trend.
3. Home sales fall to a 10-year low.
Closed home sales declined 5.4% year over year in September, pushing combined August and September volumes to their lowest level in a decade. Sales fell in 40 of the 50 largest metropolitan areas. Denver recorded the steepest cited decline at 17%, followed by Washington, D.C., at 12.1% and Atlanta at 11%. New York City was a notable exception, with sales rising nearly 1%. Higher rates have raised monthly costs, discouraging buyers and making it harder for sellers to find purchasers at desired prices.
4. FHA-backed financing is unlikely to transform the build-to-rent market.
New access to lower-cost Federal Housing Administration-insured multifamily financing for qualifying build-to-rent developments could help some developers. Cotality expects limited overall impact on rental supply and rents. Additional units can pressure rents lower, while reduced financing costs may encourage more development and competition. Construction costs, execution challenges, processing delays and restrictive zoning remain constraints. With annual build-to-rent production below 100,000 units, the incremental supply is unlikely to transform the broader U.S. rental market soon.
5. Housing turnover remains far below historical levels.
The U.S. housing turnover rate has fallen to 3.8%, well below the 5% average from 2011 through 2019. The country had approximately 18 million more households in 2025 than in 2013, yet annual sales remained around comparable levels. Cotality estimates that a return to a 5% rate could produce roughly 1.6 million additional home sales each year. Low turnover limits options for buyers and restricts mobility for jobs, family needs or changing circumstances.
6. The mortgage-rate gap continues to discourage homeowners from moving.
Thirty-year mortgage rates averaged 7.35% in October, compared with a weighted-average rate of 4.33% on outstanding U.S. mortgages in August. The outstanding average has risen from its 3.34% low in 2022 as higher-rate loans entered the market. Selling a low-rate home often means taking on a substantially more expensive loan for the next purchase; refinancing can be similarly unattractive. This lock-in effect limits listings and contributes to low transaction volume even among owners with substantial equity.
7. Adjustable-rate mortgages are attracting borrowers seeking payment relief.
Modern ARMs often begin with fixed-rate periods of five, seven or 10 years, followed by adjustments under contractual limits, along with more rigorous underwriting. Cotality reports that serious delinquency rates on ARMs originated after 2010 were below 0.5% in mid-2026–approximately half the rate for fixed-rate mortgages–and remained under 3% at the height of the 2020 pandemic. Their initial payment advantages come with future rate uncertainty; borrowers must understand adjustment timing, frequency and maximum payments.
8. Home equity lending reaches its highest dollar volume since 2008.
In the first three quarters of 2026, lenders authorized approximately 1.1 million home-equity lines of credit totaling $215 billion and originated 361,000 closed-end home-equity loans totaling $28 billion. Combined dollar volume was the highest since 2008. HELOC dollar volume rose 5.5% year over year despite an 8% decline in count. Closed-end equity loan counts fell 36%, with dollar volume down nearly 12%. Substantial equity supports borrowing, though demand is not uniformly stronger across products. These loans place the home at risk if obligations cannot be met.
9. Mortgage rates are not the only reason Americans are staying put.
Cash buyers, who are not directly exposed to mortgage rates when purchasing, are remaining in their homes at rates comparable to mortgaged owners. The difference in retention rates was 9.1 percentage points for homes purchased in 2017-2019 versus 8.2 percentage points for 2022-2023 purchases. Other barriers–including the cost of a subsequent purchase, limited suitable inventory, relocation expenses, family considerations and uncertainty about future costs–are also at work. Lower rates alone may not restore historical mobility.
10. Mortgage timing is widening differences in household wealth.
Households that purchased homes in 2020 have accumulated approximately $256,000 in home equity on average, compared with about $170,000 for those that bought in 2022. The difference reflects varying purchase prices, subsequent value changes and principal repaid. Buyers who secured rates below 4% before borrowing costs rose also benefit from lower monthly payments than those financing comparable properties today. Those payment differences can affect capacity for retirement savings and other goals. Home equity is not liquid wealth; outcomes depend on individual prices, down payments, loan balances, property values and ownership costs.
The bottom line
Cotality’s analysis points to a market shaped by affordability constraints, limited turnover, accumulated equity and mortgage structure. Existing owners often have strong incentives to retain low-rate loans. Prospective buyers face higher costs and uneven local conditions. Home-equity lending and ARMs offer alternatives, each with trade-offs. Relatively stable national prices do not signal a fluid or widely accessible market. With sales near decade lows and turnover well below historical norms, the number of households able or willing to transact remains constrained. A sustained recovery will depend on mortgage rates, housing supply, local affordability and whether buyers and sellers find sufficient financial reasons to move.
English