House for sale in Arlington, Virginia, July 13, 2023.

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Home prices rose in May for the fifth consecutive month S&P CoreLogic Case-Shiller Home Price Indexbut regional differences are widening.

The gains come despite a sharp jump in mortgage interest rates during the month.

Prices nationwide rose 0.7% month over month, seasonally adjusted. The index’s 10-city composite rose 1.1%, and the 20-city composite rose 1%.

Prices nationwide were still down 0.5% from May 2022, but only 1% below their June 2022 peak.

The 10-city composite fell 1%, year over year, slightly less than the 1.1% decline in the prior month. The 20-city index fell 1.7%, the same as the year-on-year decline in April.

“US home prices started to decline after June 2022, and the May data reinforced the case that the last month of decline was January 2023,” said Craig Lazzara, managing director at S&P DJI. “It is true that the price gains of the past four months could be capped by increases in mortgage rates or by general economic weakness. But the breadth and strength of the May report dovetails with an optimistic outlook for the months ahead.”

However, Lazzara noted, “the regional differences are still striking,” with cities in the so-called Rust Belt outperforming the rest of the nation. Prices in Chicago rose 4.6%. in Cleveland, 3.9%; and New York, 3.5% — making it the best performer. The Midwest took over the rule of the South as the most powerful region.

“If that sounds like an outlier to you, it does to me, too. It’s been five years a month since a cold-weather city took the lead (and that was Seattle, which wasn’t too cold),” added Lazzara.

Of the 20 cities, 10 saw prices fall in the year ending May 2023 versus the year ending April 2023 and 10 cities saw prices rise.

Cities in the West, where prices inflated the most, were the worst performers in May. Seattle, down 11.3%, and San Francisco, down 11%, were the worst.

Prices are going up again because supply is still so low. Existing homeowners are reluctant to sell, given that most pay mortgage rates less than half of today’s rates. Demand has returned after the initial jump in mortgage rates, as buyers seem to be getting used to the new normal.

“The housing market remains unaffordable for many buyers, but some areas are seeing high levels of competition as a result of low selling inventory,” said Hannah Jones, Research Analyst for Realtor.com. “The current limited household equity means that many markets are experiencing competition reminiscent of the past few years.”


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