Annual home-price growth hit lowest level in two years in May

Although the sales pace of existing homes might be at trough levels, home prices continue to rise in the majority of major U.S. metropolitan areas.

In May, the S&P CoreLogic Case Shiller Home Price Index rose 2.3% annually to a reading of 331.11, according to data released on Tuesday. This is down slightly from the 2.7% annual increase recorded in April and the slowest pace of home-price appreciation in two years.

“Today’s S&P CoreLogic Case-Shiller Home Price Index provides additional evidence of the transitioning housing market,” Lisa Sturtevant, the chief economist at Bright MLS, said in a statement. “Buyers have been holding back amidst elevated mortgage rates and economic uncertainty. At the same time, supply is growing, with the inventory of homes for sale higher than pre-pandemic levels in some markets. As a result, the fast pace of home price appreciation has stalled and, in some markets, home prices are beginning to fall.”

Month-over-month, the national index was up 0.45% nationally in May.

The 10-city composite index also recorded an annual increase in May, rising 3.4%, down from 4.1% a month prior. On a monthly basis, the index was up 0.36% from April to a reading of 362.80. The 20-city composite also rose year-over-year, jumping 2.8% to a reading of 342.97. On a month-over-month basis the 20-city index was up 0.42%.

Among the 20 cities, New York posted the highest annual increase at 7.4%, followed by Chicago (6.1%) and Detroit (4.9%). Tampa, once a star of the Case Shiller Index, had the worst performance among the 20 cities, recording a 2.4% annual price decrease. Other cities to record annual price decreases, included San Francisco (-0.64%), Dallas (-0.64%), and Denver (-0.01%).

The other Florida city on the list, Miami, recorded a modest 0.55% annual price increase.

“There are significant regional differences in how the housing market is performing. The Case-Shiller index for May shows that the strongest home price growth continues to be in markets in the Northeast and Midwest, where supply is still limited or where homes are more affordable. By contrast, home prices in some Southern markets are slowing as inventory has been climbing,” Sturtevant said. “Home prices are also weaker in some West Coast markets where affordability has been a major constraint.”

Looking ahead, economists expect the slower home-price growth to continue.

“Seasonal momentum is proving weaker than usual, and the slowdown is now more than just a story of higher mortgage rates,” Nicholas Godec, the head of fixed income tradables and commodities at S&P Dow Jones Indices, said in a statement. “It reflects a market recalibrating around tighter financial conditions, subdued transaction volumes, and increasingly local dynamics. With affordability still stretched and inventory constrained, national home prices are holding steady, but barely.”

Sturtevant agrees, noting that with interest rates unlikely to move lower at the Federal Reserve’s meeting on Wednesday, these slight price declines won’t do much to help improve affordability.

“It is no longer a seller’s market in many places, but that doesn’t mean it is a buyer’s market or even a balanced market,” she said. “The housing market is stuck, with both prospective buyers and sellers increasingly concerned about the economy and their own personal financial situations.”