Veros Sees Just 1% Home-Price Growth as 7% Mortgage Rates Split U.S. Housing Market

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U.S. home prices are still expected to rise over the next year, but only barely, as the renewed surge in mortgage rates deepens the affordability squeeze and widens the gap between stronger and weaker housing markets.

Veros Real Estate Solutions’ Q3 2026 VeroFORECAST, released Wednesday, projects average nationwide home-price appreciation of just 1% over the next 12 months. The forecast covers more than 300 of the nation’s largest housing markets and points to a market that is no longer moving in anything close to a single direction.

The 1% outlook is a notable step down from a year ago. Veros’ Q3 2025 forecast called for 1.8% national appreciation over the following 12 months. The latest projection comes after mortgage rates moved back above 7% and sales activity weakened sharply heading into the fall.

A market split by geography

Veros said the strongest expected appreciation remains concentrated in parts of the Northeast and Midwest, where relative affordability and tighter supply continue to support prices. By contrast, several Texas markets are among those expected to post modest declines.

That regional split has become one of the defining features of the 2026 housing market. Areas that experienced the fastest pandemic-era construction and price gains have generally had more inventory with which to absorb weaker demand. Markets with less supply, particularly in portions of the Northeast and Midwest, have been more resistant to price declines even as financing costs have climbed.

The forecast is also arriving as near-term transaction data deteriorates. WRE News reported Tuesday that Zillow found pending home sales fell 8.5% from a year earlier in September, a drop the company tied in large part to the abrupt rise in mortgage rates. The combination of slower sales and still-positive national price growth underscores the unusual pressure on buyers: demand has weakened, but prices have not fallen enough nationally to offset higher borrowing costs.

Rates are doing more of the damage

The latest Veros outlook is less a story of a broad housing-price correction than of affordability being squeezed from two sides. Home values remain high after the enormous gains of the first half of the decade, while mortgage rates have again moved into territory that sharply raises monthly payments.

That matters because a small change in home prices does little to compensate for a large move in financing costs. Buyers who re-entered the market when rates eased earlier in 2026 are now confronting a materially different payment environment. Sellers, meanwhile, continue to face the lock-in effect created by older mortgages carrying substantially lower rates, limiting the supply response in many markets.

Veros’ forecast should not be read as a guarantee that every market will appreciate by 1%. It is a national average drawn from metro-level forecasts, and the company’s own findings emphasize substantial local variation. For lenders, appraisers, investors and housing professionals, that makes local inventory, employment and affordability conditions increasingly important when assessing collateral and transaction risk.

What to watch next

The next phase of the market will depend heavily on whether the recent increase in long-term interest rates proves temporary or persists into the winter. A sustained period above 7% would keep pressure on purchase demand and could expose more markets to price declines, particularly where inventory has already rebuilt. A meaningful retreat in rates could revive demand quickly in supply-constrained markets and reinforce price resilience.

For now, the Veros forecast points to a housing market that is neither crashing nor healthy. National prices are expected to remain roughly flat in real-world terms, transaction activity is subdued, and the geographic divide is becoming more important than the national headline.