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Home sales in the US sank to the lowest in nearly 30 years, as a sharp rise in interest rates increased costs for buyers and persuaded many potential sellers with lower rates to stay put.

Just 4.09 million homes were purchased, the fewest since 1995, as tight supply pushed prices to a new record, the National Association of Realtors said.

The organisation said it expected the market to improve in 2024.

But it warned that affordability would remain an issue.

The median sale price in 2023 climbed 1% over the year, to $389,800 (£307,625), according to the NAR, which publishes the widely tracked report on sales of existing homes, which account for the bulk of purchases in the US.

The median price has jumped more than 40% since 2019, after a surge in prices during the pandemic.

Lawrence Yun, economist at the NAR, said the recent price rises were "unsustainable" and that boosting supply to create a path towards homeownership for renters was "essential".

"If price increases continue at the current pace, the country could accelerate into haves and have-nots," he warned.

The housing market in the US has slowed abruptly since 2022, when the Federal Reserve started raising interest rates in a bid to curb inflation.

Last year, US mortgage rates, which are typically fixed for a 30-year period, .

The moves ended a buying frenzy that had erupted during the pandemic, when the central bank had slashed rates to boost the economy.

Unlike in other countries, where loans with shorter terms or variable rates are more common, it has also created a stark divide between would-be buyers and existing homeowners, many of whom have loans with rates below 4% and would face sharply higher costs to move.

Mr Yun said he thought that December would mark the bottom of the market, noting that mortgage rates have dropped back in recent months, falling to 6.6% this week, the lowest level since May.

The declines come as investors bet the central bank will start reversing course and cut rates later this year.

But Nancy Vanden Houten, lead US economist for Oxford Economics, said while that may help demand, rates are likely to remain above 6% - not enough to bring a substantial number of sellers into the market.

"We expect a scarce supply of existing homes for sale to keep home price growth positive this year," she said.