Annual Home Price Growth Slows to 3.4%

Home price appreciation continued to slow in May, according to the Standard & Poor’s CoreLogic Case-Shiller Home Price Indices.

The report said the U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.4% annual gain in May, down from 3.5% in April. The 10-City Composite annual increase fell to 2.2%, down from 2.3% in April. The 20-City Composite posted a 2.4% year-over-year gain, down from 2.5% in April.

Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities in May. Las Vegas led with a 6.4% year-over-year price increase, followed by Phoenix at 5.7% and Tampa at 5.1%. Seven of the 20 cities reported greater price increases in the year ending May from a year ago.

Before seasonal adjustment, the National Index posted a month-over-month increase of 0.8% in May. The 10-City Composite posted a 0.5% increase and the 20-City Composite reported an 0.6% increase. After seasonal adjustment, the National Index recorded an 0.2% month-over-month increase in May. The 10-City and the 20-City Composites both reported an 0.1% increase. In May, 19 of 20 cities reported increases before seasonal adjustment, while 13 of 20 cities reported increases after seasonal adjustment.

“Nationally, year-over-year home price gains were lower in May than in April, but not dramatically so and a broad-based moderation continued,” said Philip Murphy, Managing Director and Global Head of Index Governance with S&P Dow Jones Indices. “Among 20 major U.S. city home price indices, the average year over year gain has been declining for the past year or so and now stands at the moderate nominal year over year rate of 3.1%.”

Murphy said nationally, increasing housing supply points to somewhat weakened demand, but noted seven cities experienced stronger year over year price gains in May than they did in April “suggests an underlying resiliency that may mitigate the risk of overshooting to the downside at the national level.”

The report said as of May, average home prices for metros within the 10-City and 20-City Composites are back to their winter 2007 levels.

“Despite the cooldown entering its 14th month, observers of the housing market should ease their broader concerns of an imminent housing market correction,” said Ralph McLaughlin, Deputy Chief Economist with CoreLogic. “We see the cooldown flattening or even reversing course in the coming months, and expect the housing market to continue coming into balance. In the meantime, buyers are likely claiming some ground from what has otherwise been seller’s territory over the past few years. If mortgage rates stay low, wages continue to grow at about the same pace as home prices and inventory continues to tick up, we can expect the U.S. housing market to continue to stabilize throughout the remainder of the year.”