Economic worries and affordability challenges continued to weigh on the housing market, new data shows, hinting that the unusually slow summer sales could portend a more bearish market in the coming months.
Housing prices rose 2.3% year-over-year in May, according to new data from the S&P CoreLogic Case-Shiller Index. This is the slowest increase in nearly two years, since July 2023, and is a drop from 2.7% in April.
Prices rose just 0.4% from April on an unadjusted basis, the slowest rise since January. Seasonally adjusted prices fell 0.3%, a worrisome sign considering this time of year is normally when home sales prices tick up amidst higher demand.
“Seasonal momentum is proving weaker than usual, and the slowdown is now more than just a story of higher mortgage rates,” said Nicholas Godec, head of fixed income tradables and commodities at S&P Dow Jones Indices, in a statement. “It reflects a market recalibrating around tighter financial conditions, subdued transaction volumes, and increasingly local dynamics.”
Cities in the Northeast and Midwest saw especially high jumps in home prices, the report found. New York City led the way with a 7.37% increase over a year ago. Boston, Chicago, Cleveland, and Detroit all saw annual increases of more than 4.5%.
It was a different story for metros in the South and West, though. Denver, Dallas, and San Francisco saw prices decline year-over-year. In Tampa, prices fell 2.42% from a year ago, marking the seventh straight month of declines.
But even areas with price growth are cooler. Nationwide, 16 of the 20 cities the index tracks showed seasonally adjusted slowdowns in prices compared to April, an indication that weakness is widespread and could persist for a while.
“The big question is, will the Fed start to cut rates in September, will we see mortgage rates go down,” said Melissa Cohn, regional vice president at William Raveis Mortgage. “Once these tariffs are in place, what kind of damage are they going to do to our economy, and more importantly, what kind of damage are they going to do to the consumer’s pocketbooks?”
Takeaways from the FHFA
Data from the Federal Housing Finance Agency, which underwent rebranding this year, suggested a similar cooling for the housing market in the months that lie ahead. (Current FHFA Director Bill Pulte now refers to the agency as U.S. Federal Housing.)
The FHFA’s index found that although U.S. home prices were up 2.8% in May from a year ago, the seasonally adjusted measure fell 0.2% compared to April. Home prices have been slowing since January, and May’s figures are the slowest since the same month in 2023.
Compared to April, the Mid-Atlantic region (which includes New York, Pennsylvania, and New Jersey) saw the steepest drop in home prices, with a 0.8% dip. States in the West, like California and Oregon, and in parts of the South, such as Kentucky and Tennessee, saw prices fall 0.6%.
As with Case-Shiller, areas in the West, South and around Texas experienced some of the softest price increases. This is consistent with other reports that have found increasing supply and softening demand are pulling prices down in these regions.
For months, analysts and industry experts have been warning that we’re in for a softer housing market this year. Even as home prices continue to hit new highs, pending sales have fallen and homes are sitting on the market longer. Data from the National Association of Realtors showed existing-home sales fell to a nine-month low in June. Economic worries and high mortgage rates are keeping many would-be buyers on the sidelines.
“I think we’re going through an adjustment period right now,” said Cohn. “I think it’ll take time until prices drop enough to get to a point where a buyer says I’m still willing to do this at a higher interest rate.”
