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U.S. home prices surged again in June to a near record high, reflecting a worsening inventory shortage that has pushed many would-be homebuyers out of the market.
Median home prices jumped 1.9% in June from the previous month, hitting $426,056, according to a new report from real estate brokerage firm Redfin. Home prices are now down just 0.6% from where they were one year ago and down 1.5% from the record high hit in May 2022.
"Today’s housing market is extraordinary; it feels hot even though there are very few homes changing hands," Redfin chief economist Daryl Fairweather said.
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Homes in Rocklin, California, on Dec. 6, 2022. ( David Paul Morris/Bloomberg via Getty Images / Getty Images)
That is largely due to a lack of available homes for sale.
Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell with rates continuing to hover near a two-decade-high, leaving few options for eager would-be buyers.
A recent report from Realtor.com showed that the number of available homes on the market in June was down more than 47% from the typical amount before the COVID-19 pandemic began in early 2020.
"Sellers are getting multiple offers if their home is priced well and in a desirable area, even though there aren’t a lot of buyers out there," Fairweather said. "That’s because house hunters have so few homes to choose from. More buyers are starting to come out of the woodwork as they get used to elevated mortgage rates, which is making the market feel even hotter."
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Houses in the Harris Ranch community of Boise, Idaho, on July 1, 2022. (Photographer: Jeremy Erickson/Bloomberg via Getty Images / Getty Images)
The Federal Reserve's aggressive interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly two decades, cooling the red-hot housing market. But even though rates have been slow to retreat, home prices are once again on the upswing as buyers adjust to the new rates and compete for limited supply.
Rates on the popular 30-year fixed mortgage are currently hovering around 6.96%, according to Freddie Mac, well above the 5.51% rate recorded one year ago and the pre-pandemic average of 3.9%.
Although mortgage rates are expected to start gradually declining amid signs that high inflation is dissipating, the decline is unlikely to be big enough that it brings a "critical mass of sellers back to the market anytime soon, meaning housing supply should remain low," the report said. "When rates do ultimately fall more significantly, prices will likely jump as more buyers move off of the sidelines."
A view of houses in a neighborhood in Los Angeles, California, on July 5, 2022. (FREDERIC J. BROWN/AFP via Getty Images / Getty Images)
The total number of homes for sale plummeted 15% in June from the previous year, hitting an all-time low last month. On top of that, new listings fell more than 30% from the previous year to about 450,000 — the lowest level and largest annual decline on record excluding April 2020, at the onset of the pandemic.
Across the country, housing inventory levels have tumbled in 95% of major markets, according to a separate report from Black Knight. The biggest swings took place in Western cities including Phoenix, Arizona; Boise, Idaho; Ogden, Utah; Colorado Springs, Colorado; and San Francisco.
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More than half of the nation's 50 largest housing markets, which are concentrated primarily in the Midwest and Northeast, returned to their prior home price peaks — or set new highs — as of May.