Home prices across 20 large U.S. cities grew in May by 1 percent from April, according to data released Tuesday from the S&P/Case-Shiller Home Price Index. That figure came in slightly under consensus expectations, which were at 1.3 percent, according to Bloomberg. Year-over-year growth, at 12.2 percent, was also slightly slower than consensus estimates of 12.3 percent.
May's 1 percent monthly price growth was markedly slower than April's 1.7 percent. However, says one expert, the slowdown isn't necessarily a disappointment.
"Prices are still rising. If we hadn't seen such huge price increases over the previous few months, a 1-percent monthly gain would sound like a huge increase," says Jed Kolko, chief economist at Trulia. "But because prices have been increasing even faster in February, March, and April, the 1-percent monthly increase is a bit of a deceleration."
According to one economist, two key factors are behind the growth in prices.
"Rising mortgage rates and increased inventory started to take the edge off of home price growth in May, a clear sign that housing market is headed toward a more balanced chapter," said Ellen Haberle, economist at Redfin, a national real estate brokerage, in a statement. "We expect that higher mortgage rates, growing inventory levels, and seasonal relaxations of home demand will continue to moderate home price growth over the next quarter."
That additional inventory is coming both from an increase in homebuilding and an influx of sellers, inspired to get into the market by higher prices, Kolko says. Unlike Haberle, However, he expresses doubts that mortgage rates caused the May slowdown in price growth; many of the sales reflected in the index, he says, were closed in March and April, before May's mortgage-rate spike.
The Case-Shiller index measures prices across 20 cities, which are exhibiting a wide range of price growth. Cities that were hard-hit by the housing crisis continue to be the leaders in price growth. San Francisco home prices rose by nearly 25 percent in May from one year ago, followed by Las Vegas at 23.3 percent, and Phoenix at 20.6 percent. Meanwhile, New York City (3.3 percent), Cleveland (3.4 percent), and Washington, D.C. (6.5 percent) had the slowest growth.
While the data represent a continuation of many broader regional trends, they also reveal a few signs of change.
"The overall report points to some shifts among various markets: Washington D.C. is no longer the standout leader and the eastern Sun Belt cities, Miami and Tampa, are lagging behind their western counterparts," said David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices.