US home prices hit another all-time high

Home prices in the United States have hit another all-time high, according to data shared by real estate company Redfin. 

The median U.S. home sale price soared to $397,954 in June, which was a nearly 5% increase from the year prior, Redfin data shows

It marks the highest on record, and the biggest increase since March, the company added. 

FILE - Single family homes in Arlington, Massachusetts, on July 19, 2022. (Photo by Suzanne Kreiter/The Boston Globe via Getty Images)

FILE - Single family homes in Arlington, Massachusetts, on July 19, 2022. (Photo by Suzanne Kreiter/The Boston Globe via Getty Images)

A monthly mortgage payment at that price, when accounting for the 6.86% median interest rate for a 30-year fixed mortgage, is now $2,749, according to FOX Business. That’s roughly $88 shy of April's record – thanks to a slight drop in mortgage rates.

"High mortgage rates and record-setting home prices have made affordability the biggest challenge in the housing market in 2024," Lisa Sturtevant, Bright MLS chief economist, told FOX Business

"Even as more inventory comes onto the market, more buyers are being priced out in markets across the U.S.," Sturtevant added. "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." 

What’s driving the US housing affordability crisis?

There are a number of driving forces behind the housing affordability crisis in the United States. 

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, meaning sellers who locked in a record-low mortgage rate of 3% or less during the pandemic have been reluctant to sell – limiting supply further and leaving few options for would-be buyers.

Will mortgage rates go down in 2024?

Economists are projecting mortgage rates will ease modestly by the end of this year.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Fed’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The 10-year yield, which topped 4.7% in late April, has been mostly falling recently following some economic data showing slower growth, which could help keep a lid on inflationary pressures and convince the Fed to begin lowering its main interest rate from its highest level in more than 20 years.

Fed officials said in June that inflation had moved closer to its target level of 2% in recent months and signaled that they expect to cut their benchmark interest rate once this year.

Even so, economists’ projections call for the average rate on a 30-year home loan to remain above 6%.

The National Association of Realtors echoed this sentiment, saying last month that it expects the 30-year fixed mortgage rate to remain over 6% this year, as well as in 2025, despite a potential rate cut by the Fed.

"In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices," NAR chief economist Lawrence Yun said in a June 27 statement.

The Associated Press and FOX Business contributed to this report. It was reported from cincinnati.