• House prices rose for the fourth straight month in May.
• Chicago recorded the biggest annual increase while Las Vegas, San Francisco, and Seattle were the worst-performing cities.
• PNC forecasts a 5% year-over-year decline in house prices in 2023.

House prices rose for the fourth straight month in May, according to the S&P CoreLogic Case-Shiller National Composite Index. The index rose 0.7% (after seasonal adjustments) in May from April following a 0.6% increase in April. U.S. house prices fell 0.5% in May from a year ago. The 20-city composite index rose 1% in May from April and fell 1.7% on a year-ago basis. The S&P CoreLogic Case-Shiller Index uses the repeat sales method to track single-family home prices monthly.

Chicago (4.6%), Cleveland (3.9%), and New York (3.5%) reported the highest year-over-year gains. Las Vegas (7.8%), San Francisco (11.1%), and Seattle (11.3%) reported the biggest yearly declines. Prices rose from the prior month in all cities tracked by the 20-city composite index except Phoenix (-0.1%).

The housing market stabilized in the first half of 2023 thanks to a resilient U.S. economy and as the Federal Reserve signaled a potential end to its hiking cycle. The renewed optimism and recent gains in house prices could complicate the Federal Reserve’s task of taming inflation. Shelter inflation, which makes up nearly a third of the CPI basket and two-fifths of the core CPI basket, has remained around 8% on a yearly basis in every month of 2023. 

A robust housing market could mean that the Fed will have to raise interest rates higher than expected or keep interest rates higher for longer. Given the upward trajectory in mortgage rates and declining affordability, PNC continues to expect slower activity in the housing market in the second half of 2023 with a recovery in early 2024 as the Federal Reserve starts cutting the fed funds rate.

The PNC Financial Services Group, Inc. is one of the largest diversified financial services institutions in the United States, organized around its customers and communities for strong relationships and local delivery of retail and business banking including a full range of lending products; specialized services for corporations and government entities, including corporate banking, real estate finance, and asset-based lending; wealth management and asset management. For information about PNC, visit www.pnc.com.