The median price of an existing home reached a new record last month at $239,700. That price increase was primarily driven by repeat buyers trading up or downsizing from their current home, according to data from NAR. First-time buyers, meanwhile, continue to be held back by affordability issues.

“We are seeing flashing yellow lights on affordability,” says Lawrence Yun, NAR’s chief economist. “People who are currently renting and want to convert into ownership — major difficulty. Home prices are rising way too fast compared to people’s income and wage growth. … We are facing housing affordability challenges already with low mortgage rates, but what happens when the rates begin to rise?”

Affordability issues are the primary reason why housing hasn’t had a stronger recovery. “While housing should be pushing overall economic growth, it is not, due to the meager activity in home construction, says Diana Olick, CNBC’s real estate correspondent. “Rental demand has been fueling most of the construction activity, but multifamily housing starts are starting to slow, as most of the activity was in higher-priced, urban rentals, where supply is now high.”

“The tight supply of homes on the market continues to constrain sales, while low mortgage rates and job growth help fuel healthy demand,” notes Andrew LePage, research analyst at CoreLogic. “This results in a pressure cooker effect, and the market’s traditional pressure release valve — new home construction — isn’t helping much, given that new home sales are running more than 40 percent below historically normal levels.”

Source: “New Warning Lights for Rising Home Prices,” CNBC (June 23, 2016)