Home Price Gains Held Steady in May

Daniel Acker/Bloomberg

Home-price gains held steady in May, as a lack of sale inventory helped prevent a meaningful slowdown in price growth despite rising mortgage rates and growing affordability challenges.

The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 6.4% in May, identical to the year-over-year increase reported in April.

An index of 10 cities gained 6.1% over the year, down from 6.4% the prior month. The 20-city index gained 6.5%, down from 6.7% the previous month.

The annual increase in the Case-Shiller national index has topped 5% every month since August 2016. Price gains are at this point one of very few strong spots in the housing market, as a lack of inventory is helping to give sellers continued pricing power despite slowing sales.

Even with a strong economy and the large millennial generation hitting prime home-buying age, the housing market has been lackluster this spring.

David Blitzer, managing director at S&P Dow Jones Indices, said rising prices are contributing to a slowdown in virtually every other housing-market indicator—from existing home sales to housing starts to pending home sales, which have lagged behind year-ago activity for six straight months, the National Association of Realtors reported on Monday.

“The combination of rising home prices and rising mortgage rates are beginning to affect the housing market,” Mr. Blitzer said.

The biggest price gains remained concentrated in the West. Seattle saw a 13.6% annual gain in prices in May compared with a year earlier, while Las Vegas prices increased 12.6% and San Francisco saw a 10.9% increase.

Rising mortgage rates have contributed to a slowdown in the pace of home sales in recent months and may also be putting slight downward pressure on prices. The rate for a 30-year mortgage was 4.54% last week, up from 3.99% at the end of last year, according to mortgage company Freddie Mac.

Existing home sales have now declined on an annual basis in five of the first six months this year, as rising prices and mortgage rates and a lack of inventory have made it more difficult for would-be buyers to find and afford homes.

Month-over-month, the U.S. Case-Shiller home-price index rose 1.1% in May before seasonal adjustment, while the 10-city and the 20-city index rose 0.5% and 0.7% respectively from April to May.

After seasonal adjustment, the national index rose 0.4% month-over-month. The 10-city index rose 0.1% and the 20-city index rose 0.2%. Nineteen out of 20 cities reported increases before seasonal adjustment.

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