PhotoMonth after month it seems to be the same story. Home prices go up, even if sales for the month are flat, or even lower.

It's a trend that has been in place since the housing recovery began, and it has begun to affect affordability.

The National Association of Home Builders (NAHB)/Wells Fargo Housing Opportunity Index (HOI) released last week found that 62% of new and existing homes sold between the beginning of April and the end of June were affordable to families earning the median income of $65,700. That's down from 65% in the first quarter.

Nationally, the median home price increased $17,000, from $223,000 in the first quarter to $240,000 in the second quarter. Interest rates are below 4%, but that's not what's driving the dramatic price rise.

During the housing bubble, prices rose because almost anyone could qualify for a mortgage. The demand for housing sent prices skyrocketing to unsustainable levels.

Not enough homes for sale

Demand is also responsible for rising prices today, but for very different reasons than a decade ago. There simply are not enough homes for sale. Fewer existing homes and fewer new homes.

Jonathan Smoke, chief economist for, says new home construction has failed to keep up with demand since the recovery. He doesn't expect to see that changing soon.

“Single-family is continuing to show gains, but the gains in permits are weaker than the gains in starts,” Smoke said in an email to ConsumerAffairs. “Builders are starting what they already permitted earlier this year but are not bullish about demand this fall and winter.”

New homes typically cost more than existing homes and housing experts say construction costs have gone up since the housing crash. For that reason, builders have largely focused on multi-family units and luxury single-family homes.

Smoke says the seasonally adjusted rate of permitting in July was not statistically significant. On a year-to-date basis, permits are up in every region but the Northeast.

Shrinking inventory

At the same time, there are fewer existing homes for sale. In its June existing home sales report, the National Association of Realtors (NAR) noted that inventory levels continue to decline. Total housing inventory at the end of the month was 2.12 million homes, nearly 6% fewer than a year ago. Inventory was at a 4.6-month supply, down form 4.7 months in May.

With supply and demand out of balance, the result is fewer renters can afford to buy. Those who can afford it may have difficulty finding a house they like.

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