Home prices hit a record high in May as the housing shortage continues and high mortgage rates continue to put housing 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 a new high in May,” said Lisa Sturtevant, chief economist at Bright MLS, “but they may be peaking as homes become increasingly affordable for homebuyers and there are more new listings on the market.”
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.
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.
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.
Years of under-construction created a nationwide housing shortage, a problem that was then exacerbated by soaring mortgage rates and the cost of construction materials.
Rising mortgage rates over the past three years have also created a “golden handcuff” effect on the housing market.
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 and will only start to fall once the Federal Reserve starts cutting rates.
Still, 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 see increased demand this fall.”
