Sun Belt Home Prices Are Flattening. Buyers Still Can’t Afford Them

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For years, the problem for Sun Belt homebuyers was easy to see: prices were rising too fast. Now the price surge is fading across much of the region, but buying a home has not become much easier.

Home prices rose just 0.45% in Texas over the year ending in the second quarter of 2026. The increase was 0.58% in Arizona, 0.96% in Florida and 0.42% in North Carolina, according to the Federal Housing Finance Agency. New Mexico prices actually fell 1.25%.

Georgia was somewhat stronger, with prices up 1.9%, but still below the 2.1% national increase.

Meanwhile, the average 30-year fixed mortgage climbed back above 7%. Freddie Mac put the average at 7.03% on Sept. 24, up from 6.95% a week earlier and 6.76% two weeks earlier. The average 15-year mortgage reached 6.42%.

That combination is creating a strange housing market across the Sun Belt. Home prices no longer need to soar for affordability to get worse.

What 7% does to an ordinary mortgage

Consider a $400,000 home with a 20% down payment. That leaves a $320,000 mortgage.

At a 3% interest rate, the monthly principal-and-interest payment would be about $1,349.

At 5%, it would be about $1,718.

At 6%, about $1,919.

At the current 7.03% average, it rises to roughly $2,135 a month.

That is about $786 more every month than the same loan at 3%, or more than $9,400 a year. And that is before property taxes, homeowners insurance, association fees and maintenance.

The Sun Belt price boom has cooled dramatically

The slowdown is especially striking because many of these states were at the center of the pandemic housing boom.

Texas, Florida, Arizona and North Carolina drew large numbers of new residents and businesses while builders raced to add homes.

The latest FHFA numbers show a very different market. Texas home prices are essentially flat from a year ago at 0.45% growth. North Carolina is at 0.42%. Arizona is at 0.58%. Florida is below 1%.

Tennessee posted an increase of 0.88%, Louisiana 1.63%, Georgia 1.9% and South Carolina 2.38%. New Mexico was one of only four states where prices declined over the year.

Nationally, home prices still increased 2.1%, but the days of double-digit annual gains across large parts of the Sun Belt are well behind the market.

For prospective buyers, however, slower price growth is only part of the equation.

Insurance, taxes and mortgage rates are now doing more of the damage

The Federal Reserve Bank of Atlanta measures home affordability using more than the sale price.

Its Home Ownership Affordability Monitor includes mortgage principal and interest, property taxes, property insurance and private mortgage insurance and compares those costs with household income.

An index reading of 100 means a median-income household can afford a median-priced home under the model. Anything below 100 is considered unaffordable.

The national index fell to 68 in July, its lowest level in 21 years, Federal Reserve Governor Michael Barr said in a Sept. 23 speech.

In other words, the affordability crisis has continued even as home-price growth has slowed sharply.

Georgia shows the same contradiction

Georgia remains stronger than several other large Sun Belt housing markets. Its 1.9% annual home-price increase was higher than Texas, Florida, Arizona, Tennessee and North Carolina.

But a buyer in metro Atlanta faces the same interest-rate mathematics as a buyer in Dallas, Tampa, Phoenix or Charlotte. A home does not have to become dramatically more expensive from one year to the next if the cost of financing it remains high.

And unlike the mortgage rate, some other ownership costs are highly local. Property taxes, homeowners insurance and HOA fees can add hundreds of dollars to the monthly cost.

The Atlanta Fed’s affordability measure specifically includes those expenses because the mortgage payment alone does not tell buyers what owning the house will actually cost.

Buyers are waiting for something to give

That leaves the Sun Belt housing market in an unusual position. Rapid price appreciation has largely disappeared in several of the region’s biggest states. But prices have not fallen enough to compensate for mortgage rates that have returned to 7%.

For affordability to improve substantially, buyers generally need some combination of lower home prices, lower mortgage rates or faster income growth.

For now, they are getting very little help from the first two. The Sun Belt’s great housing boom may be cooling. The monthly payment has not.