A broader measure of home prices, the national index, rose 0.7% month-on-month in May, but was down 0.5% from a year earlier. All data are seasonally adjusted.

Nationally, year-over-year appreciation fell 1.7 percent in May, unchanged from the previous month.

Lack of supply continues to be an issue for the real estate market as homebuyers turn to new homes as they face stiff competition for second homes. Although mortgage rates are still hovering around 7%, interest rates have not dampened demand from homebuyers as they have adapted to higher rates.

KEY DETAILS Midwestern cities saw the strongest home price gains in May.

Among the top 20 cities in May, Chicago, Cleveland and New York were the top three cities with the highest year-over-year home price gains.

In May 2023, home prices in Chicago rose 4.6 percent compared to the same month last year.

A separate report from the Federal Housing Finance Agency (FHFA) also showed that home prices rose in May, up 0.7 percent from April. Government data shows that home prices are strongest in the Pacific region.

And over the past year, the FHFA index is up 2.8 percent.

The Big Picture: These numbers may indicate that homebuyers are shifting to affordable markets in the Midwest because they still find the current real estate market challenging.

Homeowners are holding off on selling their homes, choosing instead to stay put or even rent their homes out, waiting for mortgage rates to drop low enough so that the cost of a mortgage to sell and buy a new home won't be as high.

On the other hand, buyers in popular areas of the country, frustrated by the lack of choices and fierce bidding wars, are looking for new homes, and builders have stepped up construction to meet demand.

What are they talking about?" Low inventory and surprisingly strong demand for housing have kept home prices stable or rising in many markets, Lisa Sturtevant, chief economist at Bright MLS, said in a statement, "But in many places, we're going to hit an affordability ceiling, which will happen when more inventory starts coming online later this year.

"Affordability will become an even bigger factor in the coming months as household savings are depleted, student loans recover, job growth slows, and mortgage rates stay above 6%," she added.

Commentary from S&P "U.S. home price gains continued in May 2023," said Craig J. Lazzara, Managing Director of S&P Dow Jones Industrial Indices.

"Regional differences remain significant," he added. This month's rankings show the "revenge of the Rust Belt," with Chicago (+4.6%), Cleveland (+3.9%) and New York (+3.5%) performing the best.

Lazzara noted that it was "unusual" for a Midwestern city to take the top spot because "it's been five years since a cold-weather city has topped the list (and that was Seattle, which wasn't so cold)."

MARKET REACTION: Stocks rose in early trading Tuesday. the yield on the 10-year Treasury note rose above 3.9 percent.