Record-breaking home prices defy rising mortgage rates.

Record Home Prices in May

Home prices soared to record levels in May due to a shortage of existing houses for sale. According to a report from Black Knight, home prices rose 0.7% nationally compared to April, reaching a new high. Additionally, prices in May were 0.1% higher than the previous year.

Housing Market Reheating

Despite the end of the spring homebuying season and rising mortgage rates, there are signs that the housing market is heating up again after a slump last year. Andy Walden, Black Knight’s vice president of enterprise research, highlighted that five consecutive months of price increases have reversed the previous pullback. He stated, “There is no doubt that the housing market has reignited from a home price perspective.”

More than half of the 50 largest U.S. housing markets are experiencing prices at or above their 2022 peaks, with only eight markets still down more than 5% from their highest points.

Impact of Rising Mortgage Rates

The Federal Reserve has been gradually raising interest rates for over a year and plans further hikes. As of the most recent data, the average rate on a 30-year fixed-rate mortgage is 6.81%, the highest since November. This increase follows a low of 6.08% in February. The rate on a 15-year fixed-rate mortgage currently sits at 6.24%.

Due to the significant surge in mortgage rates, homeowners with existing mortgages locked in before 2022 are hesitant to sell, as they want to keep their historically low rates. This scarcity of existing home inventory has made new homes more desirable.

Positive Trends in New Home Sales and Construction

As a result of the limited inventory, sales of new homes have been on the rise. In May, new home sales increased by 12.2% to a seasonally adjusted annual rate of 763,000, surpassing expectations.

The lack of inventory has also led to an increase in home construction. In May, the number of multifamily units under construction reached a record high of 994,000. This surge in supply is expected to alleviate rent pressures for families across the country.

Overall, the housing market is experiencing a resurgence, with record home prices, increased new home sales, and a boost in construction activity.