Buying a house gets even more expensive

• The US median home price hit a record high of $407,600 in April, according to the National Association of Realtors.
• With prices and interest rates high, Americans have been struggling to find affordable homes to buy.

Home prices reached record highs in April, according to a new report from the National Association of Realtors.

The median price of an existing home climbed 5.7% year-over-year in April to $407,600, keeping pressure on prospective homeowners already dealing with high interest rates. According to the NAR, that's the tenth month in a row of year-over-year increases and the highest-ever tally for the month of April.

Home prices rose despite the relatively flat total number of existing home sales in April (4.14 million).

"Home sales changed little overall, but the upper-end market is experiencing a sizable gain due to more supply coming onto the market," the NAR's chief economist Lawrence Yun said in a statement.

The surplus inventory might not do much to revive a sluggish real estate market, as both buyers and sellers are deterred by higher mortgage rates and property prices. While there are some brighter spots in the market with lower down payments, overall, housing affordability has plunged to its lowest levels since the pandemic. Caught in a catch-22, this scenario has led to quarterly declines in home prices in certain US cities, bucking the national trend.

NAR found that home prices dropped in 15 of 221 markets across the United States in the first quarter of 2024 compared to the same period last year, particularly in cities throughout Florida and Texas that were once regarded as hotspots for home buying.

The good news: Buyers in these markets who still have the considerable cash needed to purchase a home, are benefiting from lower prices, reduced competition, and increased inventory options.

The US real estate market is split

Depending on where you live in the US, buying a home has either become somewhat easier or far more difficult over the last year.

In Austin, where home prices declined 0.3% in the first quarter of 2024, real estate broker Nicole Marburger told Business Insider that the city's real estate market is shifting in favor of homebuyers.

"Sellers who are holding out for peak market prices may unfortunately find that, unless their property truly stands out, today's reality does not align with their aspirations," the founder and owner of Austin-based Legacy Real Estate Group at Compass said.

Marburger said she recently worked with a client who purchased a home that was previously listed for $1.25 million for just $850,000. The purchase even came with a concession, wherein the home seller provides the buyer with extra incentives, such as funds for home repairs or mortgage-rate buydowns.

However, cities like Austin are outliers in an otherwise unaffordable real estate market. In most major US cities, higher housing costs have made renting more affordable than buying — with landlords emerging as major winners.

Still, many Americans are determined to become homeowners, with some even venturing down unconventional paths to achieve their goal.

Take Greer Gagnier and Kyle Verma, who after two years of searching for an affordable starter home in Pawtuxet, Rhode Island, bought an abandoned house, as reported by Business Insider's Maria Noyen

"We looked around, put in an offer on probably six or seven houses, lost them all to cash buyers — or people would bid like $70,000 over asking," Gagnier told Business Insider. "It was just emotionally exhausting."

According to Realtor.com, the median listing price for homes in the Pawtuxet area of Providence increased from $512,000 in August 2021 to $684,500 in May 2024.

After being outbid numerous times, the couple found what they call the "worst house in the best neighborhood. In January, their offer in the low $300,000s for the decrepit 1,500-square-foot fixer-upper was accepted. They plan to renovate it over time.

"The bones were really good, and it just had a really nice flow. The layout was great. The size was perfect for what we need: a starter home," Gagnier told Business Insider.

Waiting to buy a home could be a mistake

Unlike the wealthy or adventurous few eyeing properties like Ganniers, many potential homebuyers are simply waiting for mortgage rates to drop before diving into the market.

However, those anticipating a drop in interest rates may find themselves waiting indefinitely.

This week, Federal Reserve governor Christopher Waller said the government will need to see "several months" more of signs that inflation is cooling before lowering rates. Over the past few years, the Fed has jacked up interest rates to combat a surge in inflation. But while rates have remained high, so have inflation indicators and consumer prices.

For many Americans, a decline in mortgage rates and inflation may signal an opportune moment to purchase a home — yet by that point, it could be too late.

That's because, as Business Insider's Jamie Rodriguez wrote in a March article, "When rates fall, demand shoots up."

This could precipitate a situation reminiscent of 2020 and 2021, where the attraction of low mortgage rates sparked a housing market frenzy, resulting in dwindling inventory, fierce competition, and record-high home prices.