US home prices rise in May, hitting sales

Key home price index for 20 US cities up 6.5% in May from a year earlier

US home prices rose rapidly in May, a trend that is thwarting some would-be buyers and pulling down home sales.

The S&P Core Logic Case Shiller 20-city home price index released on Tuesday rose 6.5 per cent in May from a year earlier. That’s down slightly from April, but is still more than double the increase workers are seeing in their pay cheques.

Mortgage rates have also increased, pushing up monthly costs for home buyers even further. Sales of existing homes have fallen for three straight months after peaking in November. Pending home sales have also declined over the past year.

Sales of newly-built homes, which had been growing at a solid pace this year, tumbled 5.3 per cent in June.

Still, home prices in some of the hottest real estate markets continue to move higher: Prices rose 13.6 per cent in Seattle from a year earlier, 12.6 per cent in Las Vegas and 10.9 per cent in San Francisco.

Broader increases

David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said the price increases are broader than in the housing boom and bust cycle that occurred in roughly 15 years ago.

Prices rose a strong 8.5 per cent in Denver, 7.6 per cent in Los Angeles, 7.3 per cent in Phoenix, and 6 per cent in Charlotte, North Carolina. Washington, D.C. reported the smallest increase, at 3.1 per cent.

Demand for homes is strong, fuelled by an unemployment rate near an 18-year low and modest wage gains.

Yet few homes are available for sale.