Home sales are down. So why are prices at an all-time high?

Home prices hit an all-time high in June, even as the housing market continued its post-pandemic slump.

The median price for an existing home sold last month was $435,300, besting the previous record, set in June 2024, according to data from the National Association of Realtors. But overall, sales numbers were at a nine-month low, seasonally adjusted. Sales in June decreased 2.7% from a month earlier.

How can prices be so high when the market is so slow?

“Today’s housing market is really haves and have-nots,” says Jessica Lautz, deputy chief economist at the National Association of Realtors.

While countless would-be buyers remain stuck on the sidelines, some people do have a lot of money to spend. Wages keep rising, the stock market is hitting record highs — and people who have a home to sell can use profits from these high prices to buy their next one.

“Those who have housing equity can make housing trades right now. Many of them are doing so even with an all-cash purchase,” Lautz says. “They have the ability to interact with today’s housing market, where first-time homebuyers are being shut out.”

The housing market is strongest at the top

The strongest part of the market now is the high end. Homes above $1 million saw the biggest sales spike last month, rising 14% over a year earlier. As prices rise, more homes are now priced over the million-dollar mark. An analysis by the real estate brokerage Redfin last year found that 8.5% of U.S. homes were worth $1 million or more.

It’s also a reflection of who’s buying now. All-cash buyers made up 29% of transactions last month.

For first-time and middle-income buyers, though, the market can be maddening. While home price growth has slowed, the median price is now 48% higher than it was just five years ago.

Some folks are biting the bullet and just paying a lot for a house, after saving for years or receiving help from family. First-time buyers represented 30% of transactions last month.

And many more would love to buy a house right now — but they just can’t afford it.

Many buyers are deterred by high mortgage rates

There are significantly more homes for sale than there were a year ago, but inventory is still lower than it was pre-pandemic.

And elevated mortgage rates — currently averaging 6.74% — are discouraging would-be buyers. For those who are trying to enter the market and buy their first home, these high rates on top of high prices mean they simply can’t make the numbers work. Each percentage in interest can add hundreds of dollars to a monthly payment.

“It is pricing out buyers,” says Lautz. Mortgage rates are also discouraging people from selling, she continues: “We also know the lock-in effect is real. People who have lower-interest-rate mortgages are just not willing to make this move right now unless they have a lot of housing equity.”

Ironically, if mortgage rates did drop — as many people would like — that would spur more demand and probably push home prices up even more.

In that case, “a lot of people who have been pushed to the sidelines who can’t afford today’s market are going to come in. And that’s going to be quite difficult for someone who is trying to come in as a first-time homebuyer to be able to compete,” says Lautz.

Home prices aren’t up everywhere

Redfin uses a different methodology than does the National Association of Realtors to look at home prices — it compares how much homes sold for recently with what they sold for in a previous transaction.

Using that data, researchers saw prices fall in 30 out of 50 metros, with the biggest declines in Washington, D.C.; Austin, Texas; and San Diego.

In D.C., the federal job cuts are just one factor in the decline, Marshall Park, Redfin’s senior market manager in the D.C. metro area, said in an online post. “But it’s not just layoffs. We’re also seeing signs of price sensitivity as higher interest rates force buyers to reevaluate what’s affordable.”

New homes can be cheaper than old ones

New-home sales last month, meanwhile, were up slightly over May but down nearly 7% compared with a year earlier. Analysts at Wells Fargo say the numbers reflect “weak buyer demand resulting from challenging affordability conditions and heightened economic uncertainty.”

When it comes to price, new homes used to be more expensive than old ones. But now that’s no guarantee.

The median sales price of a new single-family house sold last month was $401,800 — nearly $40,000 less than the median existing single-family home.

There are several reasons for this: Homebuilders are now building smaller houses to meet the huge demand for starter homes. Existing homes may have an advantage when it comes to location. And homebuilders have some flexibility to reduce prices as an incentive to buyers: 38% of builders said they were cutting prices in July, the highest share since the National Association of Home Builders began tracking the figure in 2022.

But the same interest rates that are keeping mortgage rates elevated are also making it more expensive to build new homes. Starts of single-family homes hit an 11-month low in June, while permits for new construction dropped to more than a two-year low.

That hit to supply isn’t great for housing prices in the months and years ahead.