National home prices rose at a sluggish pace in June as regional inventory and job growth trends drive fragmented performance across local markets.

Price gains continued to concentrate in underbuilt Midwest and Northeast metros, as persistent softening across some areas of the South and West showed signs of stabilization, according to Cotality, a real estate analytics firm.

Nationwide, home prices ultimately rose 0.3% in June to land about 1.2% higher than a year ago, the company reported in its monthly update on home prices.

“We saw solid spring and early summer price momentum despite higher mortgage rates, but that strength is likely to fade as inflation pressures, labor market weakness and elevated borrowing costs weigh on prospective homebuyers,” noted Selma Hepp, chief economist at Cotality.

Hepp described regional divergence characterized by resilience in the Midwest and Northeast, continued cooling across Sun Belt metros and rebalancing in markets experiencing sustained annual declines. That has also shifted the balance of price-related risks across the broader market.

Connecticut, New Jersey and Pennsylvania face a “severe shortage of available homes” that steady buyer demand has leveraged into rapid home price gains, the report explained. Bridgeport and Norwich, Conn., for example, saw 7.5% and 9.8% year-over-year price growth in June.

“The metros identified as having the highest risk of home price declines are concentrated in the Northeast, where affordability has deteriorated significantly relative to local incomes,” Cotality reported.

Whereas tight for-sale supply and years of pent-up purchase demand have supported robust price growth in Northeastern cities, rapid job creation and AI-related investment have provided an alternative catalyst for price gains in other markets.

As Napa, Calif., saw home prices contract 5% over the year in June amid downward pressure from wildfire-related insurance risks, San Francisco saw prices rise 7.5% as AI-driven wealth has supported strong growth.

Half a trillion dollars invested in a massive AI infrastructure project in Abilene, Texas, located 150 miles west of Dallas-Fort Worth, has brought a wave of housing demand from well-paid engineers, site operators and construction crews, pushing home prices 9.5% higher over the 12 months ending in June.

“Cities like Abilene demonstrate that even in a cooling state like Texas, targeted capital projects can generate localized demand shocks that completely contradict regional trends,” explained Hepp.

Despite the 100 largest metros showing firming price trends on aggregate in June, weakness was “increasingly concentrated” in markets in Florida, Texas and the West, the company said.

Illinois recorded the largest annual price growth in June at 6.4%, followed by Connecticut at 6% and Nebraska and Indiana at 5.8%. Texas and Colorado posted 0.6% annual price declines.