Home price increases slowed in May for the second consecutive month, the latest sign that rising mortgage rates are starting to slow activity in the housing market.
Prices climbed 19.7% nationally in May from the previous year, down slightly from the gain of 20.6% recorded in April, the S&P CoreLogic Case-Shiller index showed on Tuesday.
"Housing data for May 2022 continued strong, as price gains decelerated slightly from very high levels," Craig Lazzara, a managing director at S&P Dow Jones Indices, said. "Despite this deceleration, growth rates are still extremely robust, with all three composites at or above the 98th percentile historically."
The Case-Shiller index reports with a two-month delay. A separate report from the National Association of Realtors last week showed that the national median home price surged higher in June, hitting a new record of $416,000. That's up 13.4% from the previous year and is an increase from a revised $408,400 in May.
The interest rate sensitive housing market has started to cool noticeably in recent months as the Federal Reserve moves to tighten policy at the fastest pace in three decades in order to cool consumer demand and bring scorching-hot inflation under control. Policymakers already approved a 75-basis point rate increase in June and are expected to approve another of that magnitude on Wednesday at the conclusion of their two-day, policy-setting meeting.
Following the rate hikes, the average rate on a 30-year fixed mortgage – the most popular among new homeowners – climbed to nearly 6% in June, though they've since moderated. The average rate for a 30-year fixed rate mortgage hovered around 5.51% for the week ending July 14, according to recent data from mortgage lender Freddie Mac.
That is significantly higher than just one year ago, when rates stood at 2.88%.
Combined with high home prices, the rapid rise in borrowing costs has pushed many entry-level homebuyers out of the market. A new report from Redfin last week showed that the share of sale agreements on existing homes canceled in June was just under 15% of all homes that went under contract – the highest since early 2020ed at the height of the COVID-19 pandemic.