With fewer homes available for sale in June than ever before, homebuyer demand increased in June, driving up prices even as mortgage rates remained high, according to a report from real-estate ไbrokerage Redfin.

As of June, the median U.S. home sale price was $426,056, just 1.5% ($6,341) below the all-time high of $432,397 set in May 2022. While mortgage rates are expected to decline gradually due to cooling inflation, they are unlikely to drop sufficiently to attract a critical mass of sellers, meaning the housing supply should remain low for some time. If rates fall more significantly, prices likely will increase further as more buyers jump into the market.

Buying a new house would mean paying a much higher interest rate for most homeowners. Mortgage rates are below 6% for nine out of 10 homeowners and as low as 3% or less for those who bought in 2020 and 2021. At 6.96%, the average 30-year fixed mortgage rate in June was not far from the 20-year high of 7.08% hit in the fall.

House Hunters “Coming Out of the Woodwork”

“Today’s housing market is extraordinary; it ཧfeels hot even though there are very few homes changing hands,” said Redfin Chief🅺 Economist Daryl Fairweather in the report.

With so few homes to choose from, when a house in a good neighborhood hits the market, it's likely to get multiple offers if it's priced well, Fairweather said. At the same time, home shoppers are becoming accustomed to the higher mortgage rates that had been holding them back, he said.

Differing Views on Housing Market

While the Redfin report sees prices continuing to rise as buyers return to the market, another report, by Realtor.com, drew different conclusions.

🍷 Realtor.com, which had previously forecast prices to continue rising, ꦅchanged its outlook and for the rest of the year, and ending up down about 0.6% from a year earlier as high mortgage rates depress demand.

Competition Spurs Bidding Wars in Some Markets

While Redfin also sees high rates depressing demand, its report found that in some markets, competition is so high for the limited number of homes for sale that it's sparking bidding wars.

While competition varies between markets, a lack of available homes is fueling bidding wars in some areas. For example, Rochester, N.Y. homes are selling for 14.1% more than their asking price, while Austin, Texas homes sell for 2.1% less. Nearly half (46.8%) of the home offers written by Redfin agents encountered competition in June.