Summary Trends National growth: House prices climbed 5.9% annually in May. Metropolitan markets: 10-city and 20-city composites showed annual growth for the fourth straight month. Growth deceleration: The rate of increase slowed compared to the previous month. Market signals: Mortgage rates have eased, and housing inventory is building. Expectations: A potential Federal Reserve interest rate …
US Home Prices Climb at Historically Fast Pace: What This Means for Buyers
Summary Trends
- National growth: House prices climbed 5.9% annually in May.
- Metropolitan markets: 10-city and 20-city composites showed annual growth for the fourth straight month.
- Growth deceleration: The rate of increase slowed compared to the previous month.
- Market signals: Mortgage rates have eased, and housing inventory is building.
- Expectations: A potential Federal Reserve interest rate cut could further impact the market.
U.S. existing single-family home prices have reached new records for three consecutive months.
According to the latest data from the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, prices increased by 5.9% annually in May. This impressive growth continues despite a slight moderation in the rate of increase compared to previous months.
Home Price Index Performance
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index not only reflects national trends but also provides insights into major metropolitan markets through its 10-city and 20-city composites.
In May, both composites showed annual growth. However, both, like the national index, experienced slower growth compared to the previous month. This marks the fourth consecutive month of growth for these composites.
The index’s recent performance has been marked as the fastest growth in two years.
Brian D. Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, noted that even though annual gains have slowed down, recent performance remains promising. He emphasized that over the past six months, when mortgage rates peaked, the national index has seen consistent rises, reversing the slowdown experienced late last year.
Market Changes and Economic Signals
The latest home price data comes amid several signs of improving market conditions.
Mortgage rates peaked and then eased, and housing supply started to rebound from historically low levels.
As of the latest report, which includes data from March, April, and May, mortgage rates have continued to ease, and housing inventory has grown.
Industry professionals, in light of changing economic data, now widely anticipate a Federal Reserve interest rate cut in September.
This potential move would lower mortgage rates and might attract buyers who had previously been waiting for better conditions.
Federal Housing Finance Agency’s Insights
A second indicator of housing price trends, the Federal Housing Finance Agency’s House Price Index, showed a 5.7% growth in house prices between May 2023 and May 2024, matching the growth rate from the previous month.
Anju Vajja, deputy director for the FHFA’s division of research and statistics, highlighted that the slowdown in price appreciation continued in May amid slight increases in both mortgage rates and housing inventory.
Future Expectations
Economists predict that the slower growth trend in house prices may persist, especially as the seasonal boosts seen in spring and summer fade.
Slower price growth could be beneficial for prospective homebuyers, providing them with more options. On the other hand, this trend could pose challenges for landlords and developers. As homeowning becomes more attractive, such stakeholders might face higher vacancy rates.
