U.S. Home Prices Rise 1.1% in May as Inflation Outpaces Gains

S&P Dow Jones Indices reported on July 28 local time that U.S. home prices in May rose 1.1% year-over-year according to the S&P CoreLogic Case-Shiller National Home Price Index, accelerating from April's 0.9% gain. The 10-city and 20-city composite indices posted annual increases of 2.4% and 1.6% respectively, up from 1.8% and 1.2% in April. Rebecca Kaufman, Head of Product at S&P, noted that while nominal home prices rose 1.1% in May, inflation reached 4.2% during the same month—a three-year high—indicating real home prices continue to decline. The monthly price gains reflect seasonal strength typically associated with the spring homebuying season, though demand remains constrained by elevated borrowing costs as 30-year mortgage rates climbed to 6.5% in May.

May Index Results Show City-Level Divergence

On a non-seasonally adjusted basis, the national index increased 0.6% month-over-month in May, while both the 10-city and 20-city indices rose 0.9% from April. Chicago recorded the highest annual gain at 6.9%, followed by New York at 4.2% and Cleveland at 3.1%. Las Vegas was the only city to post a decline, falling 1.9% year-over-year.

S&P CoreLogic Case-Shiller Index Trend. Source: S&P Dow Jones Indices

S&P Analyst Highlights Real Price Decline Amid Inflation

Rebecca Kaufman stated that the May 1.1% nominal price increase contrasts sharply with the 4.2% inflation rate recorded in the same month, suggesting continued real price erosion. She explained that 30-year mortgage rates reaching 6.5% in May—far above the 3% ultra-low rates of the past—combined with persistently high inflation keeps both housing finance costs and living expenses elevated for potential buyers. Kaufman added that this environment continues to restrict housing demand, with high borrowing costs blocking potential buyers from entering the market. She noted that the monthly price increases align with seasonal patterns typically seen during the spring homebuying season.

FAQ

What does the S&P CoreLogic Case-Shiller Home Price Index measure? The S&P CoreLogic Case-Shiller Home Price Index tracks changes in U.S. residential real estate values. The national index in May rose 1.1% year-over-year, while 10-city and 20-city composite indices increased 2.4% and 1.6% respectively.

Why did S&P say real home prices are declining despite nominal gains? Rebecca Kaufman of S&P noted that while nominal home prices rose 1.1% in May, inflation hit 4.2% during the same month—a three-year high—meaning home prices fell in real terms after adjusting for inflation. She cited elevated mortgage rates of 6.5% and high living costs as factors constraining buyer demand.