Home Prices Rise 5.9%—Hitting Another Record High

Home prices hit another record high in May, with the 20 biggest metros also seeing increases.

This jump might be good news for home sellers looking to cash out, but it’s another roadblock for buyers already battling stubborn mortgage rates and low housing stock.

The cost of buying a new home was up 5.9% in May over the previous year, according to the most recent data from the S&P/Case-Shiller Home Price Indices. The national index of prices was also up 0.3% in May.

But there is a bit of good news for buyers as home price growth has slowed since April.

“The national composite rose 5.9% from a year ago in May after rising 6.4% in April,” says Realtor.com senior economist Ralph McLaughlin. “This month’s index covers home sales in March, April, and May, so the deceleration is occurring in what typically is a seasonal ramp-up period for the housing market.”

McLaughlin chalks the slower home price growth, compared with April, up to the late spring jump in mortgage rates to 7.2%. The surge kept many would-be buyers on the sidelines, and that, in turn, lessened completion, which in turn helped tamp down price growth.

Home price growth varies sharply by region

The 20 biggest metros in the U.S. saw prices climb. New York City claimed the top spot for soaring year-over-year home prices in May, with housing prices shooting up by 9.4% from the same time last year.

Coming in second and third for the largest price growth of the top 20 markets were San Diego, where prices jumped 9.1%, and Las Vegas, which increased by 8.6%.

Homebuyers looking for markets where median home prices rose slower should look to Minneapolis, and Denver, which posted a comparatively mild 2.4% and 2.1% increase, respectively. Portland, OR, saw the least growth—1.0%—out of the 20 markets that were reviewed.

“This mirrors recent trends in Realtor.com data, where markets in the Northeast and Midwest are seeing bigger upticks, reflecting local economics and broader supply and demand dynamics,” says McLaughlin.

The housing outlook

While median home prices are scorching now, they are expected to cool in autumn.

“We should expect the rate of home price growth to continue to slow over the next several months as the effects of high spring mortgage rates manifest themselves into prices,” says McLaughlin. “After that, the trajectory of price growth is going to largely be determined by how deep and frequent the Fed cuts rates as well as how desperate sellers will become.”

Indeed, economists predict that the Federal Reserve will cut interest rates in the fall and beyond. While the Fed doesn’t set mortgage rates, the two numbers often move in tandem.