U.S. home prices gained 4.9% in May from a year earlier as low mortgage rates and a shortage of listings boosted competition for properties and kept values growing even amid the COVID-19 pandemic.
The pace was lower than the annualized gain of 5.3% seen in May 2019, but only slightly, according to a report from the Federal Housing Finance Agency.
The supply of homes for sale at the end of June totaled 1.57 million, down 18.2% from the year-ago month, according to Lawrence Yun, NAR’s chief economist.
A limited supply keeps home prices high as buyers compete to get a deal.
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply,” Yun said.
Home sales have rebounded after declining in April. Earlier today, we reported that U.S. existing-home sales rose 21% in June, the biggest monthly gain on record, according to the data from National Association of Realtors.
Across the nine census divisions, the Mountain division that includes Colorado saw the strongest appreciation growth in May, with a 6.3% annual gain.
The East South Central region that includes Tennessee was next, with an annualized increase of 5.8%, followed by the East North Central region that includes Illinois, with a 5% gain and the West North Central region, that also saw an increase of 5%.
Those areas were followed by the South Atlantic area, at 4.9%.
The slowest growth pace was in the New England region, with a gain of 3.7% from a year earlier.
The FHFA index is calculated using home prices for single-family homes bought with mortgages backed by Fannie Mae and Freddie Mac. Because of this, it excludes cash transactions and sales of high-end homes bought with jumbo loans.