Housing prices New record Ongoing in May Housing shortageThis is despite the fact that soaring mortgage rates continue to put homebuying out of reach for millions of Americans.
The S&P CoreLogic Case-Shiller index showed Tuesday that national inflation rose 5.9% year-over-year in May, down from 6.4% the previous month.
On a monthly basis, prices rose 0.3%, according to the index.
“Home prices hit an all-time high in May,” said Lisa Sturtevant, chief economist at Bright MLS, “but they may be peaking as homes become increasingly more affordable for homebuyers and there are more new listings on the market.”
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The composite index for 10 cities, including Los Angeles, Miami and New York, rose 7.7% from a year earlier, up from an 8.1% increase in April.
A sign hangs outside a home for sale, Wednesday, Sept. 6, 2023, in Atlanta, Georgia. (Photographer: Elijah Nouvellege/Bloomberg via Getty Images/Getty Images)
Composite home prices in the 20 cities tracked, which also include Dallas and Seattle, rose 6.8% from a year ago, down from 7.3% the previous month.
Prices rose in all 20 major metropolitan markets tracked by the index.
“All 20 markets have seen year-over-year gains over the past six months,” Brian Luke, head of commodities, real and digital assets at S&P DJI, said in a statement. “The last time we saw such a long period of gains was during the COVID-19 housing boom, when all markets posted three consecutive years of gains.”
New York saw the biggest price increase, posting a 9.4% increase over the previous year, followed by San Diego and Las Vegas, with increases of 9.1% and 8.6%, respectively.
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A home in Hercules, California on Wednesday, August 16, 2023. (David Paul Morris/Bloomberg via Getty Images/Getty Images)
In Portland, Oregon, home prices rose just 1% year over year, again the lowest rate of increase in May.
The Case-Shiller Index is released with a two-month lag, so it may not reflect the latest market trends.
There are a variety of driving forces behind the rise in house prices.
The country’s housing shortage has been exacerbated by years of housing shortages, and then Mortgage interest rates soar and expensive construction materials.
Rising mortgage rates over the past three years have also created a “golden handcuff” effect on the housing market.
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A sign outside a home for sale on Sept. 6, 2023, in Atlanta, Georgia. (Elijah Nouvelaji/Bloomberg via Getty Images/Getty Images)
Sellers who signed mortgages at record-low interest rates of less than 3% at the start of the pandemic are reluctant to sell, further restricting supply and leaving few options for buyers eager to purchase.
Economists predict mortgage rates will remain high into 2024 before starting to fall. The Federal Reserve begins cutting interest ratesStill, interest rates are unlikely to return to the lowest levels seen during the pandemic.
“Despite the decline in home prices in the second half of 2024, there is no evidence of a significant decline in home prices nationwide,” Sturtevant said. “Though on the rise, inventory of homes for sale is still historically low. As mortgage rates fall, we will likely see increased demand this fall.”
