U.S. home prices increased 0.3% month-over-month in May – the smallest increase on a seasonally adjusted basis since January 2023, according to Redfin.
Year-over-year, prices increased 7.2%, but annual growth showed signs of plateauing, the firm says.
While home prices remain at record highs, rate of appreciation has slowed, Redfin says. That’s because even though there is a severe housing shortage, it’s not quite as severe as it was last year.
New listings have been inching upward, which has taken a little pressure off of sale prices because buyers have more options to choose from. Listings should continue to tick up slowly as the mortgage rate lock-in effect continues to wear off; eventually, the people who don’t want to move because they have an ultra-low mortgage rate have to move.
“We learned last week that inflation continued to cool in May, which means mortgage rates could decline in late summer or early fall,” says Chen Zhao, economics research lead for Redin, in a statement. “A drop in mortgage rates would bring both buyers and sellers back to the market, which could either accelerate price growth or pull it back depending on who comes back with more force. If sellers come back faster, prices would likely cool, but if buyers come back faster, prices would likely ramp up.”
New listings increased 0.3% month over month in May on a seasonally adjusted basis and climbed 8.8% from a year earlier, though they were still roughly 20% below pre-pandemic levels.
Home price growth started to ease at around the same time that new listings started to tick up last year; new listings saw their first notable increase in August 2023, and monthly price growth began cooling during the three months ending Oct. 31, 2023.
Redfin’s home price index uses the repeat-sales pricing method to calculate seasonally adjusted changes in prices of single-family homes. It measures sale prices of homes that sold during a given period and how those prices have changed since the last time those same homes sold.
It’s similar to the S&P CoreLogic Case-Shiller Home Price Indices but publishes more than one month earlier. May data covers the three months ending May 31.
Photo: Ian MacDonald