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Home prices hit a new record in June amid an ongoing housing shortage, even as high mortgage rates continued to push affordability out of reach for millions of Americans.
Prices increased 5.4% nationally in June when compared with the previous year, the S&P CoreLogic Case-Shiller index showed on Tuesday, down from the 5.9% pace recorded the previous month.
On a monthly basis, prices climbed 0.2%, according to the index.
"The upward pressure on home prices is making this the most unaffordable housing market in history," said Lisa Sturtevant, Bright MLS chief economist. "First-time and moderate-income home buyers, in particular, increasingly are being left out of the housing market."
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The 10-city composite, which encompasses Los Angeles, Miami and New York, rose 7.4% annually, compared with an increase of 7.8% in May.
A sign outside a home for sale in Atlanta on Sept. 6, 2023. (Elijah Nouvelage/Bloomberg via Getty Images / Getty Images)
The 20-city composite, which also tracks housing prices in Dallas and Seattle, posted an annual gain of 6.5%, a decrease from the 6.9% figure recorded the previous month.
Prices rose in all the 20 major metro markets tracked by the index. The largest price gain took place in New York, which recorded a year-over-year increase of 9%. It was followed by San Diego and Las Vegas, with respective gains of 8.7% and 8.5%.
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Portland, Oregon, once again saw the smallest gain in June, with home prices climbing just 0.8% from the prior year.
The Case-Shiller index reports with a two-month delay, meaning it may not capture the latest goings-on in the market.
"Mortgage rates have fallen since June, but there is evidence that even the decline in rates has not been enough to bring buyers back into the market," Sturtevant said. "Some buyers are waiting for home prices — and not just interest rates — to come down."
There are a number of driving forces behind the affordability crisis.
A home available for sale is shown on May 22 in Austin, Texas. (Brandon Bell/Getty Images / Getty Images)
Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates and expensive construction materials.
Higher mortgage rates over the past three years have also created a "golden handcuff" effect in the housing market.
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Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further and leaving few options for eager would-be buyers.
Economists predict that mortgage rates will remain elevated in 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic.