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The latest data from the S&P CoreLogic Case-Shiller home price index reveals that home prices experienced a steady increase for the fourth consecutive month in May. However, these gains are not uniform across regions and exhibit significant disparities.
Surprisingly, these gains happened despite a significant surge in mortgage interest rates during the same period.
Nationally, home prices rose by 0.7% on a month-to-month basis, after seasonal adjustment. The index’s 10-city composite experienced a gain of 1.1%, while the 20-city composite witnessed a growth of 1%.
Although national prices are still down by 0.5% compared to May 2022, they are merely 1% below the peak seen in June 2022.
The 10-city composite recorded a year-over-year decline of 1%, which is slightly lower than the 1.1% decrease observed in the previous month. Similarly, the 20-city composite declined by 1.7%, mirroring the annual drop experienced in April.
Craig Lazzara, the managing director at the S&P DJI, stated, “Home prices in the U.S. began to decline after June 2022, and the data in May supports the argument that January 2023 marked the end of this downward trend. Of course, these price gains in the past four months could be affected by rising mortgage rates or general economic weakness. Nevertheless, the overall breadth and strength of the May report align with an optimistic outlook for the coming months.”
Lazzara did note, however, that “regional differences continue to be striking,” with cities in the Rust Belt region outperforming the rest of the nation. Notably, Chicago experienced a significant price gain of 4.6%, followed by Cleveland at 3.9% and New York at 3.5%. This shift has resulted in the Midwest overtaking the South as the strongest region in terms of home price growth.
“If this seems like an unusual occurrence to you, it seems that way to me too. It’s been five years to the month since a cold-weather city held the top spot (and that was Seattle, which isn’t all that cold),” added Lazzara.
Out of the 20-city composite, 10 cities witnessed lower prices in the year ending May 2023 compared to the previous year ending April 2023, while the remaining 10 cities saw higher prices.
In May, cities in the West, where prices had previously seen substantial inflation, were the worst performers. Seattle experienced a significant decline of 11.3%, closely followed by San Francisco at 11%.
The resurgence in home prices can be attributed to the persistently low supply of available homes. Many current homeowners are hesitant to sell given that they have mortgage rates significantly lower than those in the present market. Additionally, demand has rebounded after the initial surge in mortgage rates, as buyers seem to be adjusting to the new normal.
Hannah Jones, a research analyst at Realtor.com, commented, “The housing market remains unaffordable for many buyers, but certain areas are witnessing intense competition due to the limited inventory of existing homes. This situation is reminiscent of the competitiveness observed in the market over the past few years.”
Correction: Home prices in May rose for the fourth straight month on the S&P CoreLogic Case-Shiller home price index. An earlier version misstated the number of months.
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