U.S. existing single-family house prices broke their month-long all-time high for the third straight month.
The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index climbed 5.9% on an annual basis in May, according to the latest data. While the index has hit an all-time high for a third time, May’s data also marks the second consecutive month the growth in prices has slowed, with prices increasing at a slower rate in the 12 months ended in May than in the 12 months ended in April.
The index also includes 10-city and 20-city composites of major metropolitan markets. In May, both composites reported annual growth, making it the fourth month in a row that the national index and both composites grew on a monthly basis. But, like the national index, the composite measures saw slower growth than last month.
The index’s recent performance has marked the fastest growth in two years, said Brian D. Luke, head of commodities, real and digital assets at S&P Dow Jones Indices, said in a statement released Tuesday.
“While annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging,” he said. “Covering the six-month period dating to when mortgage rates peaked, our national index has risen the past four months, erasing the stall experienced late last year.”
While home prices can always change direction, the latest home price data comes on the heels of several promising signals of improving market conditions. But it arrives with a notable lag to current conditions: Tuesday’s report uses data from March, April and May. During that time, mortgage rates peaked then eased and the supply of housing began rebounding from its historic lows. Since then, mortgage rates have eased further, and housing inventory has continued building.
At the same time, some economic data has shifted the consensus among industry professionals, most of whom now agree that the Federal Reserve will cut interest rates in September. It’s a move that would immediately affect the housing market, sending mortgage rates lower and potentially bringing sidelined buyers back into the market.
A second price index also indicated that housing price growth may be slowing. The Federal Housing Finance Agency’s House Price Index showed that between May 2023 and May 2024, house prices climbed 5.7%, according to the latest data. That’s the same rate of growth as the previous month.
“The slowdown in U.S. house price appreciation continued in May amid a slight rise in both mortgage rates and housing inventory,” Anju Vajja, deputy director for the FHFA’s division of research and statistics, said in a statement.
Some economists anticipate that the softer growth will continue, especially as the spring and summer seasonal boost fades. If prices continue decelerating, that could be good news for prospective homebuyers who could have more options. At the same time, it could be a worrisome shift for landlords and developers already struggling with vacancy rates as tenants could start opting to buy instead of renting.