Record High US Home Prices in May with Slower Growth
US home prices reached a record high in May, although the rate of increase slowed compared to the previous month.
Home Price Index Growth
The S&P CoreLogic Case-Shiller National Home Price Index reported a 5.9% rise over the last 12 months in May on a seasonally adjusted basis, which is a deceleration from the 6.4% annual gain observed in April. This increase is attributed to the limited supply of homes, which has pushed prices to new highs. Despite the slowdown, the home price index has appreciated 4.1% year-to-date, marking the fastest start in two years. Over the past four months, the national index has risen steadily, recovering from the stagnation experienced late last year when mortgage rates peaked.
Performance of Major Metropolitan Areas
The 20-city index, which monitors home prices in the 20 largest US metropolitan areas, showed a 6.8% increase in May on a yearly basis, down from a 7.3% gain in April. This was slightly higher than the 6.5% annual increase predicted by economists surveyed by Bloomberg. Among the largest cities, New York, San Diego, and Las Vegas reported the highest year-over-year gains in May, with increases of 9.4%, 9.1%, and 8.6%, respectively.
Challenges in Affordability and Market Activity
Despite the rising prices, separate data highlights that homebuyers are struggling to find affordable options. Sales of existing homes decreased in June for the fourth consecutive month due to the pressure of high interest rates on potential buyers. New home sales also reached a seven-month low. The high-rate environment has impacted sellers as well, as many are locked into lower rates and are hesitant to list their homes on the market.
Affordability Decline
Homes were less affordable in May compared to the previous year, according to the National Association of Realtors (NAR) affordability indicator. The index, which measures the ability of an average-income household to qualify for a loan on an average house in the region, fell to 93.1 in May from 99.6 a year ago. A score of 100 indicates that a family has sufficient income to afford a home in the area, while a score below 100 suggests limited affordability.
In summary, while US home prices hit a new high in May, the pace of growth has slowed. The limited supply of homes continues to drive up prices, but high mortgage rates and declining affordability present significant challenges for both buyers and sellers in the current housing market.
