Home prices hit record in June: ‘Most unaffordable housing market in history’

Home prices hit a new record in June amid a persistent housing shortage, even as high mortgage rates continued to drive away affordability for millions of Americans.

Prices rose 5.4% nationally in June from a year earlier, the S&P CoreLogic Case-Shiller index showed on Tuesday, up from a 5.9% pace last month.

On a monthly basis, prices rose by 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, chief economist of Bright MLS. “First-time and moderate-income homebuyers, in particular, are increasingly being left out of the housing market.”

The 10-city composite, which includes Los Angeles, Miami and New York, rose 7.4% on the year, compared with a 7.8% increase in May.

The 20-city composite, which also tracks home prices in Dallas and Seattle, posted an annual gain of 6.5%, down from the 6.9% figure recorded last month.

Prices rose in all 20 major metro markets tracked by the index.

The biggest price increase took place in New York, which posted a 9% year-over-year increase.

It was followed by San Diego and Las Vegas, with respective gains of 8.7% and 8.5%.

Portland, Ore., again saw the smallest gain in June, with home prices rising just 0.8% from a year ago.

The Case-Shiller index reports with a two-month lag, meaning it may not capture the latest market news.

“Mortgage rates have fallen since June, but there is evidence that even the drop in rates has not been enough to bring buyers back into the market,” Sturtevant said. “Some buyers expect home prices — and not just interest rates — to fall.”

There are a number of driving forces behind the affordability crisis.

Years of no construction fueled the country’s housing shortage, a problem that was later exacerbated by rapidly rising mortgage rates and expensive building materials.

Higher mortgage rates over the past three years have also created a “golden handcuff” effect on the housing market.

Sellers who locked in a record low mortgage rate of 3% or less during the start of the pandemic have been reluctant to sell, further limiting supply and leaving few options for eager potential buyers.

Economists predict that mortgage rates will remain high in 2024 and that they will only begin to fall once the Federal Reserve begins to cut rates.

Even then, rates are unlikely to return to the lows seen during the pandemic.