In a troubling development, housing prices in the United States have once again reached a record high, exacerbating the ongoing affordability crisis. According to a new report by Redfin, the median home sale price surged to a staggering $387,600 during the four weeks preceding May 19, marking a significant 4% increase compared to the previous year.

Despite a slight drop in mortgage rates, the cost of purchasing a new house remains burdensome for many Americans. Factoring in the current median interest rate of 7.02% for a 30-year mortgage, the monthly mortgage payment for a home at the median sale price amounts to approximately $2,854 – just $20 shy of April's record high.

Lisa Sturtevant, Chief Economist at Bright MLS, affirmed that elevated mortgage rates and soaring home prices are deterring buyers, particularly first-time homebuyers who are finding it increasingly difficult to enter the market.

The housing affordability crisis can be attributed to various factors. Years of underbuilding have contributed to a shortage of available homes across the country, which has been further exacerbated by the rapid rise in mortgage rates and expensive construction materials. Additionally, the higher mortgage rates experienced over the past three years have created a "golden handcuff" effect, with sellers who secured historically low mortgage rates during the pandemic reluctant to sell their properties, resulting in limited supply and limited options for potential buyers.

Economists predict that mortgage rates will remain high throughout most of 2024, only expected to drop once the Federal Reserve implements rate reductions. However, experts caution that rates are unlikely to reach the lows seen during the pandemic. Market investors anticipate only one or two rate reductions this year.

Sam Brinton, a Redfin Premier agent in Utah, highlighted the dilemma faced by move-up buyers who are ready to transition to a new home but are deterred by the current high interest rates. The predicament underscores the frustration experienced by many potential buyers who feel trapped in their current homes due to unfavorable financial conditions.

Although the average rate on a 30-year loan dipped slightly to 6.94% this week, according to mortgage buyer Freddie Mac, it remains significantly higher than the pandemic-era lows of just 3%. This serves as a stark reminder of the difficulties faced by aspiring homeowners.

Furthermore, the supply of available homes remains alarmingly low, down by 34.3% from pre-pandemic levels, as reported by Realtor.com. A separate survey conducted by Zillow indicated that the majority of homeowners are twice as likely to sell their homes if their mortgage rate surpasses 5%. Currently, approximately 80% of mortgage holders have rates below that threshold.

As the affordability crisis deepens and homeowners face mounting challenges, experts are calling for swift action to address the shortage of housing supply and find sustainable solutions to ensure housing options remain accessible for all Americans.