Home Price Growth Continues to Cool as New Conforming Loan Limits Approach

The latest home price data released this week by both the Federal Housing Finance Agency (FHFA) and the S&P CoreLogic Case-Shiller Home Price Index shows that while prices across the U.S. remain higher than last year, the pace of appreciation continues to lose momentum.

According to Case-Shiller, national home prices rose 1.5% year-over-year in August, marking the slowest annual increase in more than two years. The FHFA’s seasonally adjusted House Price Index (HPI) came in slightly stronger at +2.3% year-over-year, but even that represents one of the weakest growth rates since 2012.

It’s important to note that “lowest growth rate in years” doesn’t mean prices are falling it simply indicates that home values are rising at a slower pace. In fact, both indices remain near their all-time highs, showing only minimal softening in recent months. Unlike the sharp declines seen during the 2008–2009 housing crash, today’s housing market remains structurally solid, supported by limited supply, steady demand, and healthier lending standards.

Understanding the Price Patterns

The latest data highlights an interesting seasonal pattern in housing trends. FHFA’s index, which is seasonally adjusted, smooths out normal market cycles — meaning it doesn’t show the same highs and lows tied to spring and summer buying seasons. In contrast, Case-Shiller’s non-seasonally adjusted numbers reflect those fluctuations more clearly, showing predictable peaks in summer and dips in fall and winter.

Historically, August marks the earliest point in the year for home prices to hit a short-term low, though it’s relatively rare. Typically, the market bottoms out around October, which won’t appear in the data for another two months due to normal reporting lags. As a result, year-over-year price growth is unlikely to pick up next month, especially considering that August 2024 was one of those uncommon trough months in pricing.

What’s Next: 2026 Conforming Loan Limits

Attention is now turning to the upcoming update of the conforming loan limits, which the FHFA is expected to announce by the end of November. The current baseline limit stands at $806,500, and loans at or below this threshold qualify for purchase by Fannie Mae and Freddie Mac. These so-called “conforming loans” typically come with lower interest rates, easier qualification requirements, and smoother processing compared to jumbo loans that exceed the limit.

Loan limits are recalculated annually based on FHFA’s quarterly house price data. As of the end of Q2, home values were 2.876% higher than the same quarter last year, and the most recent monthly data suggests that appreciation has ticked up slightly to around 3.2%. If that projection holds, the new conforming loan limit would likely rise to just over $832,000 for 2026.

For buyers in high-cost markets including parts of California, New York, and Washington, D.C. local limits could be even higher, giving them more flexibility to borrow under conforming terms.

Key Takeaways from the Data

FHFA House Price Index (Seasonally Adjusted)

• Month-over-Month: +0.4% in August (July revised to 0.0%)
• Year-over-Year: +2.3%

S&P CoreLogic Case-Shiller Index (National, Non-Seasonally Adjusted)

• Month-over-Month: +0.2%
• Year-over-Year: +1.5%
• 10-City Composite: +2.1% YoY
• 20-City Composite: +1.6% YoY

Together, the two indices underscore the gradual cooling of home price appreciation that began in mid-2024. FHFA’s figures reflect a national market that remains resilient but no longer overheated, while Case-Shiller’s regional breakdown points to pockets of strength in some urban markets and mild declines in others.

Looking Ahead

Economists expect the slowdown in price growth to persist into early 2026, particularly if mortgage rates remain in the 6% range and supply continues to improve modestly. However, with inventory still far below pre-pandemic norms and household formation remaining strong, few anticipate widespread price declines.

In short, the housing market is cooling, not collapsing. The moderation in prices could provide some breathing room for would-be buyers, especially as new loan limits expand borrowing options heading into the new year.

“We’re seeing a normalization, not a correction,” said one housing economist. “After years of double-digit gains, a few percentage points of annual appreciation is a healthy sign that the market is finding balance again.” For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.