Home Prices Are on Fire. But the Flames Are Flickering.

Home Prices Are on Fire. But the Flames Are Flickering.

Roger Pettingell Sarasota Real Estate

This Los Angeles neighborhood is one of many in the U.S. where prices have been soaring during the pandemic.


Frederic J. Brown/ AFP/Getty Images

Home prices in May are expected to have risen at a near-record pace, according to consensus estimates for data due Tuesday. More recent data suggests price growth could slow in the following months. 

The S&P CoreLogic Case-Shiller home price index tracking pricing in 20 of the nation’s largest metropolitan areas is expected to have risen 21% in May, according to consensus estimates gathered by



FactSet
,

about flat with last month’s record-high year-over-year gain of 21.2%.

The May forecast underscores how powerful the forces are pushing up home prices in the U.S. A housing shortage has kept prices on the march even as the stock market tumbled amid rising interest rates.

While the anticipated growth rate in May is only slightly below April’s, price growth deceleration could be in the cards for June, more recent data suggests. The National Association of Realtors, which publishes the median sales price of existing homes monthly, said recently that existing-homes in June sold for a median $416,000, an increase of 13.4% from the year prior. 

June’s rate of year-over-year existing-home price growth, while still well above prepandemic levels, was the slowest since December 2020, according to historic data provided by the trade group. On a call with journalists, National Association of Realtors chief economist Lawrence Yun said price growth is expected to decelerate further as mortgage rates remain high. 

The pandemic housing frenzy slowed down in June as mortgage rates rose. The average rate on a fixed 30-year mortgage in June climbed to 5.81 for the first time since 2008, according to weekly



Freddie Mac

data. While rates have since fallen, they have remained well above 2021 levels. As of last week, the average mortgage rate was 2.43 percentage points higher than the last reading in 2021.

That put pressure on home affordability, resulting in a less competitive housing market. Both existing-home sales and housing starts fell in June, according to data released last week. Home cancellations, too, rose, with the rate of canceled contracts in June at its highest point since 2020.

Despite pressure from higher mortgage rates, buyer demand remains high, said says Selma Helpp, CoreLogic’s deputy chief economist, in a statement. “Home price growth, while slowing, will likely remain in double digits through the remainder of this year,” she added.

Other data released Tuesday will offer a look at the market for new homes last month. New homes in June are expected to have been sold at a rate of 665,000, down from 696,000 in May, according to consensus estimates compiled by FactSet.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com


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