The median price for a U.S. home has climbed to a historic high, according to recent data from Redfin. In June, the median home sale price surged to $397,954, marking a nearly 5% increase from the previous year. This represents the highest level on record and the most significant annual increase since March.
With the median interest rate for a 30-year mortgage at 6.86%, the monthly mortgage payment for a home at this price now stands at $2,749. This is just $88 below April’s record, thanks to a slight dip in mortgage rates.
"High mortgage rates and record-setting home prices have made affordability the biggest challenge in the housing market in 2024," said Lisa Sturtevant, Bright MLS chief economist. "Even as more inventory comes onto the market, more buyers are being priced out in markets across the U.S. Some buyers are going to wait for rates to come down in the second half of the year which means that it could be a relatively slow summer for home sales."
Several factors are driving this affordability crisis. Years of underbuilding have led to a housing shortage, a problem worsened by the sharp rise in mortgage rates and the high cost of construction materials.
Higher mortgage rates over the past three years have also created a "golden handcuff" effect. Sellers who secured record-low mortgage rates of 3% or less during the pandemic are hesitant to sell, further restricting supply and limiting options for prospective buyers.
Economists predict that mortgage rates will remain elevated throughout most of 2024 and will only start to decline once the Federal Reserve begins cutting rates. However, rates are unlikely to return to the pandemic lows, with investors anticipating only one or two rate reductions this year.
Freddie Mac reported that the average rate on a 30-year loan increased slightly to 6.95% this week. While this is down from the peak of 7.79% last fall, it remains significantly higher than the pandemic-era lows of around 3%.
According to a report by Realtor.com, the available home supply is still down a staggering 34.3% from pre-pandemic levels. A Zillow survey revealed that most homeowners are nearly twice as likely to sell their home if their mortgage rate is 5% or higher. Currently, about 80% of mortgage holders have rates below 5%.