Real estate prices rise again to new record in June

Amid the ongoing housing shortage, home prices hit a new record high in June, while millions of Americans remain unable to afford a home due to high mortgage rates.

As the S&P CoreLogic Case-Shiller index showed on Tuesday, prices nationwide rose 5.4 percent year-on-year in June, a decline of 5.9 percent from the previous month.

According to the index, prices rose by 0.2 percent on a monthly basis.

“Upward pressure on home prices is making this housing market the most unaffordable in history,” said Lisa Sturtevant, chief economist at Bright MLS. “First-time and middle-income buyers in particular are increasingly being shut out of the housing market.”

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The combined 10-city index, which includes Los Angeles, Miami and New York, rose 7.4 percent year-over-year, compared with a 7.7 percent increase in May.

The 20-city index, which also tracks home prices in Dallas and Seattle, posted an annual gain of 6.5 percent, down from the previous month's 6.9 percent gain.

Prices rose in all 20 major cities included in the index. The largest price increase was in New York, where prices rose 9% year-on-year, followed by San Diego and Las Vegas, with increases of 8.7% and 8.5%, respectively.

The US housing market is stuck and could remain so until 2026.

Portland, Oregon, again recorded the smallest increase in June; real estate prices here rose by just 0.8 percent compared to the previous year.

The Case-Shiller Index releases its reports with a two-month lag, meaning it may not capture the most current developments in the market.

“Mortgage rates have been falling since June, but there are signs that even the drop in rates is not enough to bring buyers back into the market,” Sturtevant said. “Some buyers are waiting for home prices – not just interest rates – to come down.”

There are several causes behind the affordability crisis.

A home for sale is shown in Austin, Texas on May 22, 2024. (Brandon Bell/Getty Images / Getty Images)

Years of under-development led to a housing shortage in the country, a problem later exacerbated by rapid increases in mortgage rates and expensive building materials.

The higher mortgage interest rates of the last three years have also led to a “golden handcuff” effect on the real estate market.

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Sellers who secured record-low mortgage rates of 3% or less at the start of the pandemic were hesitant to sell, further limiting supply and leaving eager potential buyers with few options.

Economists expect mortgage rates to remain high in 2024 and not begin to fall until the Federal Reserve begins cutting rates. Even then, rates are unlikely to return to pandemic lows.