US home prices were up nearly 20% in May compared to the year before. But there were signs the market began to cool as rising mortgage rates pushed more prospective buyers to the sidelines.
Home prices rose 19.7% in May from the year before, a slightly smaller jump than the 20.6% growth seen in April, according to the S&P CoreLogic Case-Shiller US National Home Price Index.
“Housing data for May 2022 continued strong, as price gains decelerated slightly from very high levels,” says Craig J. Lazzara, managing director at S&P Dow Jones Indices. “Despite this deceleration, growth rates are still extremely robust.”
Sun Belt cities saw the biggest price increases among the 20 US cities tracked by the index.
Tampa led the way with a 36.1% price increase in May from the year before. It was followed by Miami, which was up 34%, and Dallas, with a 30.8% increase.
All 20 cities saw double-digit price increases in May from a year before.
However, he said, at the city level, there is evidence of deceleration. Price gains for May exceeded those for April in only four cities. As recently as February of this year, all 20 cities were accelerating.
“Prices continued to be the strongest in the South and Southeast, both of which recorded 30.7% gains year-over-year,” said Lazzara.
But rising mortgage rates have had an impact, making the cost of financing a home too expensive for some potential buyers. For all of May the average interest rates for a 30-year, fixed-rate mortgage were above 5%, having been as low as 3.22% in January, according to Freddie Mac.
“We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that was ongoing as our May data were gathered,” Lazzara said. “Accordingly, a more-challenging macroeconomic environment may not support extraordinary home price growth for much longer.”