The latest home price data affirms what housing analysts predicted – that the pace of home price growth, and sales, would begin to plateau as mortgage rates remain elevated and buyers' purchasing power wanes.
U.S. home prices rose 0.3% month over month in May, representing the smallest increase on a seasonally adjusted basis since January 2023, Redfin reported Tuesday. Prices climbed 7.2% in May year over year, but Redfin’s Home Price Index (RHPI) indicated annual growth showed signs of leveling off.
This latest report comes nearly a week after the real estate brokerage reported the median U.S. home sale price hit an all-time high of $394,000 during the four weeks ending June 9. Last week's Consumer Price Index (CPI) showed inflation cooling, and in turn, average mortgage rates dropped to their lowest level in three months.
“We learned last week that inflation continued to cool in May, which means mortgage rates could decline in late summer or early fall,” Redfin Economics Research Lead Chen Zhao said. “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.”
Similar to the S&P CoreLogic Case-Shiller Home Price Indices, the RHPI 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. May data covers the three months ending May 31, 2024.
Last August was when home price growth started to ease just as new listings began to grow substantially, with price growth cooling during the three months ending Oct. 31.
This spring home prices remain at record highs, but the pace at which they’re growing has slowed, Redfin data show. New listings have inched upward in a number of markets as buying activity has slowed, taking pressure off of sale prices.
The nation’s housing shortage is gradually improving, as new listings rose 0.3% month over month in May on a seasonally adjusted basis and climbed 8.8% from a year earlier. For historical perspective, new listings were still roughly 20% below pre-pandemic levels.
