Home-price growth in the U.S. decelerated in May as the pressure of higher mortgage rates started to sideline potential buyers.
A national measure of prices rose 19.7% year-over-year, smaller than the 20.6% climb in April, the S&P CoreLogic Case-Shiller index showed Tuesday.
The U.S. housing market has suddenly started to slow after more than two years of a breakneck pace. Sellers are now having to consider slashing prices and homes are lingering on the market longer. More home deals are falling through and sales of previously owned homes dropped in June to a two-year low. Still, price gains decelerated “slightly” from “very high” levels, according to Craig Lazzara, a managing director at S&P Dow Jones Indices.
“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,” said Lazzara. “A more-challenging macroeconomic environment may not support extraordinary home-price growth for much longer.”
A measure of prices in 20 U.S. cities posted a 20.5% gain in May, down from the 21.2% increase in April, according to the index. Only four cities had price gains in the year ending May that exceeded the growth in the year ending in April. That’s a marked change from February, when all 20 cities were accelerating, S&P said.
The index covers more than 27 years of data and is an important gauge of the health of the U.S. housing market, in part due to its breadth of measurements around the country.