Home prices in May were 19.7% higher compared with the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index.
This marks the second month of slower increases, as the housing market cools due to higher mortgage rates and increasing concern over inflation. In April, the annual gain was 20.6%.
The 10-city composite rose 19% year over year, down from 19.6% in the previous month. The 20-city composite increased 20.5%, down from 21.2% in April.
Cities seeing the strongest gains were Tampa, Florida, Miami and Dallas, with annual increases of 36.1%, 34% and 30.8%, respectively. Four of the 20 cities reported higher price increases in the 12 months that ended in May versus the 12-month period that ended in April. In February of this year, all 20 cities in the survey were seeing increasing annual gains.
"Despite this deceleration, growth rates are still extremely robust, with all three composites at or above the 98th percentile historically," Craig Lazzara, managing director at S&P DJI, said in a release.
"We've noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that was ongoing as our May data were gathered. Accordingly, a more-challenging macroeconomic environment may not support extraordinary home price growth for much longer," he added.
Mortgage rates have been rising steadily since January of this year, when the average rate on the 30-year fixed loan hovered around 3%. It spiked to just over 6% in June and has since settled back to around 5.75%. Given the recent inflation in home prices, which are up 40% since the start of the coronavirus pandemic, the fast rise in interest rates hit affordability hard. Potential buyers have been sidelined.
"In the short-term, transactions are feeling the pressure, with sales of existing homes down for five consecutive months. In addition, with less competition, houses that would have flown off the market within hours last year are lingering," said George Ratiu, manager of economic research at Realtor.com. "The share of homes seeing price cuts has doubled from a year ago, as motivated homeowners want to close a deal before more buyers drop out of the market."