High housing costs are dampening homebuyer demand as mortgage applications drop to their lowest level in nearly 30 years and home prices increased to the highest they’ve been in nearly a year. 

For the four weeks ended Sept. 3, the median U.S. home sale price rose 4.5% from 2022, as mortgage rates remain above 7%, and inventory continues to be sparse, according to a new Redfin report. 

That’s not stopping those who want to purchase a new home from buying, but they will have to pay a premium. The median sale price of a home last month rose 4.5% to $378,725, the highest annual increase since October 2022. The median asking price was up 3.7% to $379,747, marking the biggest annual increase since November 2022.

The amount of homes for sale is down 18% from last year, the largest decline since February 2022, according to the report. New listings are also down, falling 9% as potential sellers hold onto their homes and their mortgage rates. 

“The market is marching on, especially for turnkey homes,” said Chicago Redfin Premier agent Niko Voutsinas. “If folks can figure out a way to buy instead of rent, they will. Some buyers are cutting back on other expenses to up their housing budgets because they believe home prices are only going to increase. They’re nervous that the minute rates come down, a flood of competition will edge them out. Those buyers typically need to move quickly and offer at or above the asking price if they love a home, because so few listings are hitting the market.”

For the four weeks ended Sept. 3, pending home sales fell 13.3%, the 15th month in a row they’ve dropped.