Against the backdrop of further inventory strain and a relatively low mortgage rate environment, buyers seemed to rally in May, driving U.S. home costs up for the fourth consecutive month, according to the latest S&P Case-Shiller Index.
Home prices climbed 1.2% from April to May, marking the fourth consecutive month of growing price tags this year. decreased 0.5% year-over-year in May, down from a 0.1% loss the month before.
While experts consider the monthly growth as further evidence of resilience in home prices—at a time when mortgage rates dipped—price tags tell a different story annually as they declined again in May, albeit modestly.
The index shows a dip of 0.1% in May compared to the same time last year. The 10- and 20-City indexes dipped 1.0% and 1.7%, respectively.
While nearly half of the cities analyzed showed price dips in May, the Midwest region saw some of the largest upticks in costs. Chicago, Cleveland, and New York reported the highest year-over-year gains among the 20 cities in May, climbing 4.6%, 3.9% and 3.5%, respectively.
The complete data for the 20 markets measured by S&P:
Atlanta, Georgia
May/April: 0.9%
Year-Over-Year: 2.1%
Boston, Massachusetts
May/April: 1.2%
Year-Over-Year: 0.2%
Charlotte, North Carolina
May/April: 1.2%
Year-Over-Year: 2.3%
Chicago, Illinois
May/April: 2.3%
Year-Over-Year: 4.6%
Cleveland, Ohio
May/April: 2.7%
Year-Over-Year: 3.9%
Dallas, Texas
May/April: 1.6%
Year-Over-Year: -3.8%
Denver, Colorado
May/April: 0.7%
Year-Over-Year: -4.9%
Detroit, Michigan
May/April: 2.3%
Year-Over-Year: 2.1%
Las Vegas, Nevada
May/April: 0.9%
Year-Over-Year: -7.8%
Los Angeles, California
May/April: 1.2%
Year-Over-Year: -3.1%
Miami, Florida
May/April: 1.2%
Year-Over-Year: 3.4%
Minneapolis, Minnesota
May/April: 1.6%
Year-Over-Year: 0.3%
New York, New York
May/April: 1.9%
Year-Over-Year: 3.5%
Phoenix, Arizona
May/April: 0.9%
Year-Over-Year: -7.6%
Portland, Oregon
May/April: 1.0%
Year-Over-Year: -5.1%
San Diego, California
May/April: 1.9%
Year-Over-Year: -4.6%
San Francisco, California
May/April: 1.0%
Year-Over-Year: -11.0%
Seattle, Washington
May/April: 1.9%
Year-Over-Year: -11.3%
Tampa, Florida
May/April: 1.0%
Year-Over-Year: 0.7%
Washington, D.C.
May/April: 1.5%
Year-Over-Year: -0.1%
The takeaway:
“The rally in U.S. home prices continued in May 2023,” says Craig J. Lazzara, managing director at S&P DJI. “The ongoing recovery in home prices is broadly based. Before seasonal adjustment, prices rose in all 20 cities in May (as they had also done in March and April).”
“Home prices in the U.S. began to fall after June 2022, and May’s data bolster the case that the final month of the decline was January 2023. Granted, the last four months’ price gains could be truncated by increases in mortgage rates or by general economic weakness. But the breadth and strength of May’s report are consistent with an optimistic view of future months.” Lazzara concluded.
“Today’s S&P CoreLogic Case-Shiller Index demonstrated the resilience of home prices as buyers took advantage of May’s relatively lower rates, keeping the pressure on available inventory,” said Hannah Jones, economic research analyst at realtor.com®.
“This month’s index data tracks prices for March, April and May, a period during which mortgage rates spanned a 0.5 percentage point range but largely remained on the low end. Slightly lower rates motivated eager buyers to enter the housing market, but dwindling home supply meant that this demand kept upward pressure on prices.
“The housing market remains unaffordable for many buyers, but some areas are seeing high levels of competition as a result of low for-sale inventory. Though buyer demand has generally lessened, limited existing home stock means many markets are seeing competition reminiscent of the last few years. New listings have lagged the previous year’s levels for long enough that the impact has become clear in active inventory, which has fallen year-over-year for the last four weeks. Still-high mortgage rates mean that many homeowners feel ‘locked-in’ by their current mortgage rate and are choosing not to sell, leading to dwindling existing home inventory and existing home sales falling nearly 20% year-over-year.
“We expect this trend to keep playing out as mortgage rates remain elevated for the time being. Though home prices are likely to continue to cool slightly, as they did in June, limited inventory relative to buyer demand will likely keep prices somewhat afloat. However, these trends vary greatly market to market,” Jones concluded.
“Home prices may have bottomed out in May—at least for now—with the S&P CoreLogic Case-Shiller Home Price Index showing prices down 0.46% between May 2022 and May 2023 but rising 1.4% between April and May,” said Lisa Sturtevant, chief economist at Bright MLS. “However, the housing market remains uncertain and it’s possible that price gains this summer will be followed by another dip in home prices in the fall.”
“Low inventory and surprisingly resilient housing demand have kept home prices stable or rising in many markets. But we are going to hit an affordability ceiling in many places which will happen just as more inventory begins to come on line later this year. As a result, it’s possible that the ‘bottoming out’ of home prices is just the first half of a ‘w-shaped’ pattern in the market.
“Home prices have been rising much faster than incomes for decades, but the gap between the growth in home prices and income widened during the pandemic. Home buyers were able to get into the market because of low mortgage rates, and repeat buyers were able to use the significant build-up of equity in their homes to buy. But with households running through their savings, student loan payments set to resume, job growth slowing, and mortgage rates remaining above 6%, affordability is going to be a bigger factor in the months ahead,” Sturtevant concluded.
