U.S. home prices rose for the fourth straight month in May, according to the S&P Case-Shiller index.
A broader measure of home prices, the national index, rose month-over-month in May by 0.7%, but was down 0.5% over the past year. All numbers are seasonally adjusted.
Nationally, year-over-year appreciation in May was down 1.7% though, unchanged from the previous month.
A lack of supply remains a problem for the housing market, as buyers face heavy competition for previously-owned homes, and turn to the new home market. Though mortgage rates are still hovering around 7%, rates have not dampened buyer demand, as they’ve adjusted to higher rates.
Key details: Cities in the Midwest posted the strongest home-price gains in the month of May.
Chicago, Cleveland and New York led the rankings as the top three cities with the highest year-over-year price gains among the top 20 cities in May.
Homes in Chicago gained 4.6% in May 2023 as compared to last year.
A separate report from the Federal Housing Finance Agency also showed home prices rising in May, up 0.7% from April. Home prices were the strongest in the Pacific region, according to the government’s data.
And over the last year, the FHFA index was up 2.8%.
Big picture: The data may suggest that buyers are turning to affordable markets in the Midwest, as they continue to find the current housing market challenging.
Homeowners are holding out on selling homes, opting to stay put or even rent their home out and wait until mortgage rates come down enough such that selling and buying a new home with a new mortgage won’t be as expensive.
Buyers on the other hand, frustrated by a lack of options and heavy bidding wars in hot parts of the U.S. are looking for new homes, and builders have ramped up construction to meet demand.
What S&P said: “The rally in U.S. home prices continued in May 2023,” Craig J. Lazzara, managing director at S&P DJI, said.
“Regional differences continue to be striking,” he added. “This month’s league table shows the Revenge of the Rust Belt, as Chicago (+4.6%), Cleveland (+3.9%), and New York (+3.5%) were the top performers.”
Lazzara noted that a Midwestern city taking the top spot was “unusual” as it has been “five years to the month since a cold-weather city held the top spot (and that was Seattle, which isn’t all that cold).”
Market reaction: Stocks DJIA, +0.52% SPX, +0.40% were up in early trading on Tuesday. The yield on the 10-year Treasury note TMUBMUSD10Y, 3.912% rose above 3.9%.