Home prices rose for the fourth consecutive month in May even as buyers continued to confront steep mortgage rates.
Prices increased 1.2% nationally in the period from April to May on a non-seasonally adjusted basis, the S&P CoreLogic Case-Shiller index showed Tuesday. On an annual basis, prices are down just 1% from their peak in June 2022, according to the index.
"The rally in U.S. home prices continued in May 2023," said Craig Lazzara, managing director at S&P DJI, in a release. "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… The breadth and strength of May’s report are consistent with an optimistic view of future months."
The 10-city composite, which encompasses Los Angeles, Miami and New York, fell 1% annually, compared with a 1.1% increase in April. The 20-city composite, which also tracks housing prices in Dallas and Seattle, fell 1.7% in May, unchanged from the previous month.
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There was a major discrepancy in the price gains in the 20 cities: Chicago saw a 4.6% annual gain, making it the best-performing city for the first time. Cleveland, meanwhile, posted a 3.9% gain, followed by New York with a gain of 3.5%.
On the other end of the spectrum, cities on the West Coast posted some of the biggest declines. Seattle prices plummeted 11.3%, edging out San Francisco with its 11% decline.
"Regional differences continue to be striking," Lazarra said. "This month’s league table shows the revenge of the Rust Belt, as Chicago, Cleveland, and New York were the top performers. If this seems like an unusual occurrence to you, it seems that way to me too."
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The Case-Shiller index reports with a two-month delay, meaning it may not capture the latest ongoings in the market.
The interest-rate-sensitive housing market entered a deep freeze last year in the wake of the Federal Reserve's aggressive interest-rate hike campaign.
However, as buyers have adjusted to higher mortgage rates and grappled with limited inventory, the housing market has shown early signs of stirring back to life.
Rates on the popular 30-year fixed mortgage are currently hovering around 6.78%, according to Freddie Mac, well above the 5.51% rate recorded one year ago and the pre-pandemic average of 3.9%.
A separate report released last week showed the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose one point to 56, the highest reading since June 2022.
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Sentiment has been steadily rising as a worsening inventory shortage buoys consumer demand for new homes.
"The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers," said Alicia Huey, NAHB chair and a homebuilder from Alabama.
