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House prices continue to rise

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Home prices in May rose for the fourth straight month on the S&P CoreLogic Case-Shiller home price index, but regional differences are widening.

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

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

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

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

“U.S. home prices began to decline after June 2022, and May data confirms that the last month of the decline was January 2023,” said S&P DJI chief executive Craig Lazzara. “Granted, the price gains of the past four months could be truncated by increases in mortgage rates or general economic weakness. But the breadth and strength of May’s report is consistent with an optimistic outlook for the months ahead.”

Lazzara, however, noted that “regional differences continue to be striking,” with cities in the so-called Rust Belt outperforming the rest of the country. Prices in Chicago gained 4.6%; in Cleveland, 3.9%; and New York, 3.5%, making them the best performers. The Midwest took over the reign of the South as the strongest region.

“If that sounds unusual to you, it sounds to me too. It’s been five years since a cold city held the number one spot (and that was Seattle, which isn’t that cold),” Lazzara added.

Of the composite of 20 cities, 10 cities saw lower prices in the year ending May 2023 compared to the year ending April 2023 and 10 saw higher prices.

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

Prices are rising because supply is still very low. Current owners are hesitant to sell, as most are paying mortgage rates less than half of current rates. Demand returned after the initial jump in mortgage rates as buyers seemed to get used to a new normal.

“The housing market remains unaffordable for many buyers, but some areas are experiencing high levels of competition due to low inventory for sale,” said Hannah Jones, research analyst at Realtor.com. “Limited inventory of existing homes means that many markets are experiencing competition reminiscent of recent years.”

Correction: Home prices in May rose for the fourth straight month on the S&P CoreLogic Case-Shiller Home Price Index. An earlier version incorrectly indicated the number of months.

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