Home-price growth saw a slight uptick in the latest report, but the trend does not yet appear to be a concern among economists as growth remains down historically and affordability continues to see some marked improvement.
The S&P Cotality Case-Shiller National Home Price Index saw home prices grow 1.1% year-over-year in May, up from the 0.8% gain seen in April (upwardly revised to 0.9%).
Despite the upward movement, Rebecca Kaufman—associate director of Commodities at S&P Dow Jones Indices—noted that “May’s data suggests that U.S. home prices continue to decline in real terms.”
“Even on a nominal basis, the market remains noticeably weaker than a year ago,” she continued, noting that at the same time last year, the index was up 2.4% year-over-year.
Month-over-month, the index saw a 0.6% gain—but after seasonal adjustment, that shifted to a 0.05% decrease.
Realtor.com® Senior Economist Anthony Smith stated that this month-over-month decrease (after seasonal adjustment) is “a reminder that spring’s nominal gains owe more to seasonal patterns than to improving fundamentals.”
“Additionally, with May’s CPI running at 4.2%, the gap between home price gains and inflation has stretched to nearly 3 percentage points, extending the streak of negative real home price returns to 12 consecutive months,” he added.
The regional picture, however, remains much more mixed.
The index’s 10-City Composite saw a year-over-year increase of 2.4%, up from the 1.8% gain seen last month. Month-over-month—and after seasonal adjustment—the composite was 0.3% (up 0.9% pre-adjustment), a reversal of last month’s 0.04% fall.
The 20-City Composite posted a year-over-year increase of 1.6%, up from the 1.1% gain seen last month. Month-over-over, the seasonally adjusted composite was up 0.1% (up 0.9% pre-adjustment).
Looking at metro data, the index saw Chicago again post the largest year-over-year increase in May (6.9%), followed by New York (4.2%) and Cleveland (3.1%).
On the other hand, the largest year-over-year decline was seen in Las Vegas (1.9%), followed by Seattle and Denver (1.8%), and Tampa (1.6%).
Kaufman noted that the “geographic dispersion of home price trends continues to persist,” as while the Northeast and Midwest continue to see large home-price gains, the West and the Sun Belt remain “under pressure.”
Bright MLS Chief Economist Lisa Sturtevant characterized the differing trends as “a tale of two (or maybe three) markets.”
“In most Midwest and Northeast markets, where inventory is low and new construction is limited, prices are still being pushed up. The AI boom is fueling price growth in San Francisco, making it its own unique marketplace,” she continued. “But in much of the South and the West, rising inventory and cooling demand has put the brakes on home price appreciation.”
Looking ahead, Smith noted that “the summer market faces a more complicated backdrop than earlier in the year.”
Kaufman explained that affordability “remains a significant headwind for the housing market,” and with the backdrop of elevated mortgage rates and inflation, “housing demand remains constrained, elevated borrowing costs continue to discourage potential homebuyers, and housing values decline in real terms for existing homeowners.”
However, Sturtevant did note that “slower home price growth and modest price declines are helping with affordability,” coupled with a few other bettering signs.
“Even stuck in the mid-6% range, mortgage rates are lower than they were last year at this time, and the median monthly payment is about the same,” she continued. “Inventory is on the rise, bringing more options to buyers. And sellers are more willing to negotiate, with a record share of active sellers cutting their asking prices.”
Overall, the consensus of the outlook for the coming months remains one of cautious optimism toward a more stabilizing market.
