Home prices were up 0.5% this May from a month earlier and 5.9% higher year over year, according to First American Data & Analytics’ latest Home Price Index (HPI) report.
Home prices are also now 54.6% higher than pre-pandemic levels, and April’s HPI was revised up 0.2%, growing 0.5% to 0.7% from March.
“In May, annualized house price appreciation slowed for the fifth consecutive month, clearly showing a returning-to-normal trend toward slower price appreciation,” First American Chief Economist Mark Fleming said. “The normalization of house price appreciation is the result of ‘higher-for-longer’ mortgage rates reducing affordability and slowing demand, but it’s also driven by the increase in the number of homes for sale.”
No matter how high mortgage rates or home prices get, life goes on and there will always be homebuyers.
“The longer we go with higher rates, the less the rate lock-in effect constrains sellers,” Fleming pointed out. “Moving decisions continue to happen regardless of mortgage rates due to the ‘Five D’s’ of life events – diapers, diplomas, divorce, downsizing and death.”
First American’s HPI tracks home price changes in three tiers of market price distribution.
Regions across the U.S. that experienced the greatest YOY increases in Starter Tier HPI were Nassau County, New York (14%); St. Louis (13.1%); Miami (12.3%); Pittsburgh (11.4%); and NY, New York (10.1%). Those same metro areas also experienced price increases in the Mid-Tier and Luxury-Tiers. For Mid-Tier, Nassau County rose 12.5%, St. Louis, 4.7%, Miami 9%, Pittsburgh, 4.4%, and New York, NY, 6.8%. For Luxury Tier, Nassau County rose 5.4%, St. Louis, 3.2%, Miami, 6.2%, Pittsburgh, 2.2%, and New York, NY, 2.1%.
Homes in the Starter Tier appreciated in price at a much higher rate than those in the Mid-Tier and Luxury-Tier for several reasons, according to Fleming.
“The impact of lifestyle changes on housing demand is a significant reason why starter tier prices continue to outperform prices in the mid and luxury tiers," he pointed out. “Many millennials are still searching for their first home and now face competition from the oldest members of generation Z. Housing was underbuilt for more than a decade, so it’s no surprise that starter tier prices are surging in the New York area, St. Louis, Miami and Pittsburgh."
There were no year-over-year decreases in HPI this May at the national, state, and metropolitan area levels, which First American classifies as Core-Based Statistical Areas (CBSAs).
In fact, the CBSAs with the greatest annual increases in HPI were Anaheim (10.5%), Miami (9.5%), San Diego (8.4%), and Las Vegas (7%).
