May Home Prices See Smallest Monthly Increase in Nearly 18 Months

Home prices in May ticked up just 0.3% from the previous month, marking the smallest seasonally adjusted monthly increase since January 2023. And while prices increased 7.2% from a year earlier, annual growth shows some flattening in the curve. 

That’s according to the Redfin Home Price Index report, based on the most recent results of its repeat-sales pricing method*. 

While home prices nationwide are still at record highs, the rate of increase has slowed. Because even though inventory remains low, the shortage is not as severe as it was in 2023. 

New listings have been slowly but steadily increasing, which has eased some of the upward pressure on sale prices by giving buyers more options to choose from. 

Listings should continue slowly ticking up as more sellers list their homes in spite of their ultra-low mortgage rates. The lock-in effect is a temporary one; at some point, the real pain of staying put becomes greater than the anticipated pain of taking on a higher interest rate. 

We learned last week that inflation continued to cool in May, which means mortgage rates could decline in late summer or early fall. A drop in mortgage rates would bring both buyers and sellers back to the market, which could either accelerate price growth or pull it back depending on who comes back with more force. If sellers come back faster, prices would likely cool, but if buyers come back faster, prices would likely ramp up.

Chen Zhao

Redfin Economics Research Lead

New listings in May were up 0.3% from April on a seasonally adjusted basis. Year over year, they were up 8.8%, though they remained about 20% below pre-pandemic levels. 

Home price growth started to slow down around the same time new listings started to creep up in 2023. New listings saw their first significant gain in August 2023, and monthly price growth started cooling during the three months ending October 31, 2023. 

Source: Redfin

*The repeat-sales pricing method is what the Redfin Home Price Index (RHPI) uses to calculate seasonally adjusted changes in single-family home prices. 

Read the full report for more information, including methodology and metro-level data.