MW Inflation is quietly chipping away at most Americans' main source of wealth

By Aarthi Swaminathan

Home values are barely growing, no thanks to a stagnant housing market

The median price of an existing home was $422,400 in August, according to the National Association of Realtors. That's down from a record high in June.

Home prices are growing at the slowest pace in over two years as the housing market remains stagnant. That may be bad news for many homeowners across America - if the trend persists.

As home sales stalled at the end of the summer, home prices reflected the market's slow environment. Nationally, home prices grew just 1.5% in August from a year ago, according to the S&P Cotality Case-Shiller Index released Tuesday.

It was the weakest annual increase in over two years, and was below the current rate of inflation, which is at 3%. Home prices grew at a slightly faster rate than the previous month, by 1.6%.

Home prices in the 20 biggest metro areas in the U.S. also slowed significantly as home-buying demand sagged, rising just 1.6% year-over-year, as compared with a 1.8% increase the previous month.

Slow home-price growth will likely come as good news to aspiring home buyers, who've been contending with swiftly rising home prices in recent years.

It's also bad news for homeowners.

For most homeowners across the nation, their home is their biggest financial asset and their main source of wealth. Despite record-high stock-market gains this year, many Americans are not reaping the rewards. Only 43% of U.S. adults reported personally owning stocks, according to a report by the Federal Reserve Bank of Philadelphia Consumer Finance Institute.

On the other hand, the national homeownership rate was 65% as of the second quarter of 2025, according to the U.S. Census Bureau. In other words, more people own homes than stocks.

With the rate of inflation exceeding the rate of increase of home prices, homeowners' housing wealth is being eroded in real terms, the S&P Cotality Case-Shiller index makers said.

"[W]ith price growth running at half the rate of inflation and several major markets in decline, the rapid appreciation of recent years has clearly ended," said Nicholas Godec, head of fixed-income tradables and commodities at S&P.

Though this change "may ultimately lead to a more sustainable market," he added, "homeowners are watching their real equity erode."

If it persists, the trend could have implications for how U.S. homeowners view their financial well-being, and they may adjust their spending patterns as a result.

"The housing wealth effect is no longer a tailwind to consumer spending and broader economic growth as it had been in the years immediately after the pandemic when house prices were rising rapidly in most parts of the country," Mark Zandi, chief economist at Moody's Analytics $(MCO)$, told MarketWatch.

"This is especially important for middle-income Americans, many of whom own their home, but don't own much in stock," he added.

"The housing wealth effects are turning into a headwind to growth in much of the South and Western U.S. given recent house price declines in these regions," Zandi noted.

Related: Inflation is still rising, CPI likely to show - but maybe not fast enough to stop Fed rate cuts

The typical home value nationwide as of September was $364,900, according to data from real-estate platform Zillow (Z). The company noted its Zillow Home Value Index showed flat home prices - rising 0% - from the same month a year ago.

The 30-year mortgage in August remained relatively elevated, hovering over 6.5%. But in recent weeks, the average 30-year rate has fallen sharply, which could accelerate home-buying demand. As of Oct. 28, the 30-year averaged 6.13%, according to Mortgage News Daily.

To be sure, even though many Americans are seeing a decline in their home value when adjusted for inflation, "this is not a repeat of the 2008 home price crash," Heather Long, chief economist at the Navy Federal Credit Union, told MarketWatch. "Home values nationally are still up an incredible 56% since January 2020."

From the archives (January 2025): How much of your net worth should be tied up in your house, as wildfires and other disasters make owning a home riskier?

Long also doesn't think that stalling home prices are a big pain point for homeowners.

"A modest adjustment in prices after such a big run up is not having much impact on homeowners," she said..

Unless they're selling their house, in which case, slowing home-price growth may be a problem. "They are still getting a great gain," Long said, "but many homes are sitting on the market longer and having to do price cuts or other incentives."

Read more: Home sellers have a 'tough pill to swallow' this fall, real-estate agents warn

-Aarthi Swaminathan

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October 28, 2025 13:17 ET (17:17 GMT)

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