- U.S. home prices rose 0.3% in May, the fastest monthly gain since January, according to Redfin.
- Year-over-year prices increased 2.5%, driven by a brief dip in mortgage rates in April that spurred demand.
- Pending sales have since flattened as rates moved higher, but tight inventory continues to support prices.
Prices on U.S. homes edged up 0.3% in May from the prior month, marking the quickest pace of monthly appreciation since January, Redfin reported Thursday. The gain pushed the year-over-year increase to 2.5%.
The pickup was fueled by a temporary decline in mortgage rates in April, which brought some buyers off the sidelines. However, the momentum has faded: pending sales have flattened in recent weeks as rates climbed back above 7%.
"We saw a brief window of activity when rates dipped, but that's closed," said a Redfin economist. "Now we're back to a standoff between buyers and sellers."
Tight inventory remains the key factor propping up prices. The number of homes for sale is still well below pre-pandemic levels, and new listings have been slow to come to market. According to Homes.com, the national median price stood at $395,000 in May, with wide regional variation. Markets like Chicago saw stronger gains, while Miami experienced softer pricing.
"Supply is gradually improving in some areas, but overall, it's still a seller's market," said a Homes.com analyst. "We're moving toward balance, but it's uneven."
The Federal Reserve's interest rate path remains the wild card. If rates ease later this year, demand could pick up again; if not, the market may continue to grind sideways. For now, buyers are grappling with high borrowing costs, while sellers are reluctant to give up their low-rate mortgages.
Note: This article uses data from Redfin and Homes.com, which were contacted for comment but did not respond by publication time.