Cotality flagged mortgage escrow gaps hitting 65% of homeowners
Your fixed-rate mortgage may feel like a financial anchor, but a growing share of homeowners are discovering that the costs layered on top of principal and interest are anything but fixed. Property taxes and insurance premiums have surged so sharply since the pandemic that most escrow accounts in the country are now running short.
Cotality, the property data and analytics firm, released its April 2026 property market report, identifying 10 trends shaping the housing and mortgage landscape as the market enters the second quarter.
Cotality identifies five housing market trends reshaping prices, equity, and rents
The first half of Cotality's report focuses on the housing side of the market, where price growth is stabilizing, regional disparities are widening, and homeowners are sitting on record equity they largely cannot access.
1. Home price growth is stabilizing
After seven consecutive months of slight price declines, Cotality's HPI data shows prices edged up by 0.04% in February, with early March figures suggesting a further 0.34% gain. Sellers are listing properties for 1.1% less year over year, signaling weakening leverage, yet prices remain 48% above pre-pandemic levels.
2. Regional price growth varies
Affordable markets have posted the largest cumulative gains since March 2020, with Knoxville, TN, and Camden, NJ leading at 84% and 82% respectively, Cotality reported.
Charleston, SC, West Palm Beach, FL, Hartford, CT, and Providence, RI all gained at least 70%, while San Francisco, New Orleans, Washington D.C., and New York's metro divisions stayed below 25%.
3. California's housing market started 2026 with a decline
New listings across California fell 10% year over year in the first quarter, with 19 of 25 metros posting declines, according to Cotality. San Diego saw the sharpest drop at 24%, while the San Francisco Bay Area and Riverside each declined more than 10%, and statewide inventory at the end of March was 11% lower than in 2025.
4. Home equity is at record levels, but remains largely inaccessible
California holds roughly a quarter of the nation's tappable home equity but accounts for only about 12% of active HELOC balances, according to Cotality. That gap highlights how a massive store of household wealth remains locked up, particularly for younger workers with limited liquidity to handle economic shocks.
5. Single-family rent growth cooled to 1.1% as the rental market softens
Rent growth slowed across all price tiers in February, though higher-cost rentals showed more resilience at 2.0% year-over-year growth, Cotality reported. Fewer metros posted annual declines compared to January, and Los Angeles recorded its first annual rent decline since the 2025 wildfires, suggesting that fire-driven rent spikes are beginning to normalize.
Five mortgage market trends show escrow gaps, rising delinquencies, and shifting investor behavior
The second half of Cotality's report examines the mortgage side, where escrow shortfalls, climbing delinquency rates, and a pullback from large institutional investors are adding new layers of uncertainty for borrowers and market participants.
1. Escrow shortages are projected to hit 65% of homeowners at an average of $2,100
Approximately 65% of homeowners' escrow accounts are projected to experience shortages in 2026 due to escalating insurance premiums and property taxes, Cotality reported.
Escrow-related expenses have increased by roughly 45% over the past five years, and the average shortage this year is expected to reach $2,100, translating to about $175 in additional monthly costs for the typical homeowner, according to Cotality.
Over the last couple of years, we've seen surges in insurance and property taxes
Homeowners in Florida and Colorado have been hit hardest, with escrow cost increases of 70% and 77%, respectively, according to Cotality's data. Those spikes reflect the compounding effect of severe weather, rising reconstruction costs, and local property tax reassessments driven by elevated home values.
2. Large-scale real estate investors are pulling back from single-family home purchases
Investors purchased 27% of single-family homes in March, only slightly down from 29% a year earlier, according to Cotality.
Mega investors with portfolios exceeding 1,000 properties accounted for most of the decline, with their market share falling from 2.4% to 1.2%, potentially reflecting concerns about pending legislative action that could restrict or ban investor home purchases.
3. Non-qualified mortgage loans are growing but remain more disciplined than pre-pandemic levels
Non-QM loans made up about 9% of the total mortgage market by dollar volume in 2025, up 1.7 percentage points from the prior year, Cotality reported.
The non-QM market dipped below 7% during the 2020 pandemic but climbed past 12% by 2022, and Cotality's analysis indicates that today's growth reflects changes in borrower profiles rather than a return to risky lending practices.
4. The mortgage rate lock-in effect is easing as outstanding rates climb closer to current levels
The weighted-average outstanding mortgage rate reached 4.27% in February, its highest level since early 2015, according to Cotality.
The spread between outstanding rates and the prevailing 30-year rate has narrowed to 1.8 percentage points, down from a peak of 3.9 percentage points in October 2023, which signals that more borrowers may be willing to list their homes without sacrificing a deeply below-market rate.
5. Serious mortgage delinquencies are ticking higher, led by FHA loans
The share of seriously delinquent mortgages, those 90 or more days past due, reached 1.14% in February 2026, Cotality reported. FHA loans saw the steepest deterioration, with delinquency rates climbing 170 basis points year over year to 5.57%, while VA loan delinquencies declined 30 basis points and conventional loans held steady at 0.67%.
Those delinquency pressures are not landing evenly. Borrowers in disaster-prone states like Florida and Colorado are absorbing the steepest escrow increases, at 70% and 77% respectively, while homeowners in regions with slower price appreciation and more stable insurance markets face far smaller adjustments.
More Real Estate:
- Why selling a home to your child for a dollar can backfire
- Commercial Real Estate Outlook 2026: Analysts See Signs of Recovery
- Redfin says mortgage rates, profits are hitting real estate now
The disparity means that two borrowers with identical mortgage terms can experience sharply different monthly payment shocks depending on where they live, deepening a geographic divide that already shapes who can afford to stay in their home.
That uneven burden is already influencing where people choose to stay and where they leave. As insurance costs climb in high-risk markets, homeowners who lack the savings to absorb repeated escrow adjustments may face a choice between stretching their budgets further or relocating to more affordable regions.
Escrow shortfalls are compounding the broader affordability squeeze for homeowners
Cotality's 10 trends sketch a housing market caught between stabilization and strain. Home prices have flattened after years of runaway gains, the rate lock-in effect is loosening, and large institutional investors are stepping back, shifts that, under different conditions, might signal a healthier, more accessible market.
Escrow shortages are projected to reach nearly two-thirds of borrowers this year, FHA delinquencies are climbing at the fastest pace in the report, and homeowners in disaster-prone states are absorbing cost increases that dwarf the national average.
Related: Assumable Mortgages: Pros and Cons
The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
This story was originally published May 21, 2026 at 11:03 AM.