Real estate agents leave a house for sale during a broker’s open house in San Francisco, California.
Justin Sullivan | fake pictures
Home prices continued to rise in May, albeit at a slightly slower rate than in April, likely due to the brief but sharp slowdown in home sales as the coronavirus pandemic hit the nation.
Nationwide, prices rose 4.5% on a yearly basis in May, according to the US National S&P CoreLogic Case-Shiller Home Price Index, which is less than the 4.6% gain in April.
Home prices in the compound of 10 cities increased 3.1% annually, down from 3.3% the previous month. The 20-city composite increased 3.7% year-over-year, down from 3.9% in April (Detroit was excluded from the composite due to data collection issues).
“Obviously more data will be needed to know whether May’s report represents a reversal of the previous trajectory of accelerating prices or simply a slight deviation from an intact trend,” said Craig Lazzara, managing director and global head of index investment strategy. at S&P Dow Jones Indices. “Even if prices continue to slow down, that’s quite different from an environment where prices actually drop.”
Home values increased in the 19 cities for which data were available, but gains accelerated in just three. Prices accelerated in 12 cities in April and 18 cities in March.
Regionally, price increases in Phoenix, Seattle, and Tampa continued to be the strongest in the nation. Phoenix recorded a 9% price increase year-over-year, followed by Seattle with a 6.8% increase and Tampa with a 6% increase. Price gains were smallest in Chicago, New York, and San Francisco.
Prices probably weakened because closed sales of existing homes were 26% lower annually in May, according to the National Association of Realtors. As the nation closed, open houses closed and buyers withdrew. But that marked the lowest point before the market started to recover quickly and strongly. Sales posted a record one-month gain in June, although they were still lower compared to the previous year.
Prices continue to get a boost from record low mortgage rates. Rates have been hitting new lows recently, giving buyers more buying power and creating more urgency to buy now, before rates go up again.
The biggest problem is the severe housing shortage, which has only been exacerbated by accumulated spring demand and the pandemic’s new urgency to buy larger suburban homes. The supply of homes for sale decreased 18% annually at the end of June.
“House listings have been evaporating from the market, putting strong upward pressure on prices that have already exceeded their pre-pandemic pace,” said George Ratiu, senior economist at realtor.com. “Without a significant influx of supply, both new and existing, the market will run out of steam in the second half of the year.”
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