Real Estate

A “For Sale” sign is seen in front of a home on May 30, 2019 in Miami, Florida.
Joe Raedle | Getty Images

Home prices continue to break records, as strong demand slams up against weak supply.

Nationally, prices in May were 16.6% higher than in May 2020, according to the S&P CoreLogic Case-Shiller home price index. That is an increase from the 14.8% annual increase in April. The 16.6% gain is the highest reading in the report’s 30-plus years.

The 10-city composite annual increase was 16.4% in May from 14.5% in April. The 20-city composite gained 17.0% year-over-year, up from 15.0% the month before. All 20 cities reported higher price increases in the year ending May 2021 versus the year ending April 2021.

Phoenix, San Diego and Seattle reported the highest year-over-year gains among the 20 cities in May. Phoenix led the way with a 25.9% year-over-year price increase, followed by San Diego with a 24.7% increase and Seattle with a 23.4% increase. Chicago, Cleveland and Minneapolis reported the lowest gains, although they were still in low double-digits.

“A month ago, I described April’s performance as ‘truly extraordinary,’ and this month I find myself running out of superlatives,” said Craig Lazzara, managing director and global head of index investment strategy at S&P DJI. “We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. May’s data continue to be consistent with this hypothesis.”

Five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – saw their all-time highest annual gains. Price gains in all 20 cities were in the top quartile of historical performance; in 17 cities, price gains were in top decile.

Mortgage rates fell slightly to start May and held within a narrow range throughout the month. Rates have been so low for so long that even slight monthly moves higher have done nothing to take the heat out of home prices.

Sales of both new and existing homes have weakened in the past few months, largely due to sky-high prices. The inventory of homes for sale has finally started to increase, albeit very slowly. An increase in listings is the only thing at this point that could pull price gains back a bit.

Demand is still strong due to simple demographics of the largest generation, millennials, moving into its homebuying years. Mortgage rates have also been falling again in the past few weeks.

“This dynamic confluence of housing developments is helping keep price growth in check as we approach August. Looking at the months ahead, we expect inventory to continue growing into the fall, shifting the typical seasonal trend and keeping real estate activity on a roll,” said George Ratiu, senior economist at