In May 2024, U.S. home prices rose by just 0.3% from the previous month, marking the smallest increase since January 2023. This slow growth is attributed to a slight rise in new listings, providing buyers with more options amidst high mortgage rates. Despite a 7.2% year-over-year increase, the pace is plateauing, suggesting a cooling market.
The Redfin Home Price Index (RHPI) indicates this trend, which uses repeat-sales pricing to measure changes in single-family home prices. While the housing shortage remains severe, it's easing compared to last year, with new listings increasing gradually. This slight increase in supply has alleviated some pressure on sale prices.
Chen Zhao, Redfin’s Economics Research Lead, noted that cooling inflation could lead to lower mortgage rates by late summer or early fall, potentially revitalizing the market. If sellers re-enter the market more rapidly than buyers, prices might continue to cool. Conversely, if buyers return more forcefully, prices could rise again.
New listings increased by 0.3% month-over-month in May and by 8.8% from the previous year but remain 20% below pre-pandemic levels. The easing in price growth coincides with the rise in new listings, which began to increase notably in August 2023.
Key Takeaways for Buyers and Sellers:
For Buyers:
- Expect more choices as new listings gradually increase.
- Anticipate potential lower mortgage rates later in the year, which could make buying more affordable.
For Sellers:
- Be prepared for a competitive market as more listings emerge.
- Consider listing sooner rather than later to avoid potential price drops if supply outpaces demand.
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