U.S. home prices climbed higher in May, presenting another affordability hurdle for prospective homebuyers dealing with inflated consumer prices and elevated mortgage rates.

The seasonally adjusted FHFA House Price Index (HPI) from the Federal Housing Finance Agency rose 0.3% from April and 2.2% over the preceding 12 months, the regulator of Fannie Mae and Freddie Mac reported Tuesday.

The HPI, which uses purchase-only data provided by Fannie and Freddie, saw the largest monthly upswing in the East South Central census division. Home prices in that geographic area — which includes Alabama, Kentucky, Mississippi and Tennessee — increased 1.4% in May, far outpacing 0.5% gains in South Atlantic states and 0.4% gains in New England.

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All parts of the country, except for the East North Central and Pacific divisions, recorded monthly home price increases. The Pacific division — which comprises the West Coast states, plus Alaska and Hawaii — saw prices fall 0.6%, while the Midwest states of Ohio, Illinois, Indiana, Michigan and Wisconsin posted an aggregate decline of 0.2%.

The Middle Atlantic states of New Jersey, New York and Pennsylvania experienced the largest year-over-year increase of 4.5%, while the Pacific division’s 0.3% dip represented the only annual decline.

Case-Shiller index notches 1.1% annual gain

In separate data released Tuesday, the S&P Cotality Case-Shiller U.S. National Home Price NSA Index rose 0.6% monthly and 1.1% annually in May.

The report from S&P Dow Jones Indices highlighted a “stark regional divergence in home price trends,” with nearly nine percentage points separating the strongest market (Chicago, where home prices were up 6.9% year over year) and the weakest (Las Vegas, where prices fell 1.9%).

“This divergence may reflect shifting post-pandemic housing dynamics, including a growing return-to-office mandate that appears to be supporting traditional urban markets,” noted Rebecca Kaufman, associate director of commodities at the company best known for operating the stock market’s S&P 500 and Dow Jones Industrial Average indexes.

The Case-Shiller index measures prices of repeat sales of single-family U.S. homes. A separate composite index tracking prices in the 10 largest metropolitan areas posted a 2.38% year-over-year gain, while the 20-city composite logged 1.63% annual appreciation.

But when adjusted for inflation, U.S. home values fell in real terms for the 12th consecutive month, as May’s 4.2% annual inflation rate significantly exceeded the 1.1% increase in national home prices.

“Affordability remains a significant headwind for the housing market,” Kaufman observed. “Thirty-year mortgage rates increased to 6.5% in May, leaving the ultra-low 3% borrowing costs a distant memory. At the same time, stubbornly high inflation rates are keeping both the cost of home financing and the cost of living high for prospective buyers.”

Kaufman concluded: “Against this backdrop, housing demand remains constrained, elevated borrowing costs continue to discourage potential homebuyers, and housing values declined in real terms for existing homeowners.”