US home prices increased 0.3% in May on a seasonally adjusted basis, the fastest monthly gain since January, as April's drop in mortgage rates boosted buying demand and fed into the month's closings, Redfin said Tuesday.
Prices rose 2.5% from a year earlier, the strongest annual growth in six months, the brokerage said.
"Buyers got a boost from lower mortgage rates in the spring, and that momentum is showing up in prices," said Sheharyar Bokhari, Redfin senior economist. "And even though there are many more home sellers than buyers in the market, the most desirable homes are still attracting multiple offers, driving up prices."
Closed US home sales reached the highest since 2022 in May, though desirable and affordable inventory remains limited, Redfin said. New listings are flattening, which may keep price growth steady despite softer demand, the report said.
"Buyers who are waiting for prices to fall may not get much relief," Bokhari said. "Instead, they may consider expanding their search area or negotiating for concessions -- like mortgage-rate buydowns or closing-cost credits -- from sellers."
Home prices rose in 29 of the 50 most populous US metro areas last month. Cleveland, Providence, Rhode Island, and New York posted the biggest gains, Redfin said.
On Monday, Redfin said 46% of US home sellers offered concessions in May, using financial incentives to close sales in a cooling market.
Mortgage applications for new home purchases in May fell 3% from April as buying slowed, the Mortgage Bankers Association said last week.