Home Prices Grew 17.2% in June -- the Highest Level Since Late 70s

Home values continue to soar. That's great news for sellers but makes for a challenging real estate market for buyers.

Home buyers in today's real estate market have been struggling to find affordable properties, and the problem seems to be getting worse month after month. In June, home prices grew 17.2% compared to June of 2020, according to analytics firm CoreLogic. That's the highest level of growth since the late 1970s.

Meanwhile, on a month-over-month basis, home prices grew 2.3% from May's levels. And while CoreLogic predicts that home price gains will slow to a 3.2% increase by June of 2022, that still leaves buyers in a tough spot right now.

Why are home prices so high?

A big reason why home prices have soared boils down to a lack of inventory. Sellers have held off on listing their homes over the past year as economic and pandemic-related concerns have soared. Because there's been such limited inventory available, buyers have had to compete more for homes, and that's resulted in bidding wars.

During a bidding war, two or more buyers keep raising their offers for the same property in the hopes of landing a deal. That doesn't just lead to individual home prices rising, though.

When a few homes in a given neighborhood land in a bidding war and sell for a higher price, upcoming sellers in that same neighborhood will then frequently list their homes for more money, knowing they can command those prices. That's kicked off a vicious cycle on a national level that probably won't be broken until more properties hit the housing market. And we don't know when that will happen.

Should buyers pause their home searches?

If you're in the market for a new home, you may be wondering whether it pays to keep looking or put your house-hunting plans on hold. And the answer is, there's no right or wrong way to go.

While home prices are up right now, mortgage rates are sitting near historic lows. So while you might pay more for a home, your monthly mortgage payments might still be affordable. That said, mortgage rates are likely to stay low well into next year, at which point there may be more housing inventory to choose from. That means that come 2022, you may have an easier time finding a home you like, and you may be able to pay less for it.

If you don't have a compelling reason to move right now, you may want to sit tight, especially if you've been growing increasingly frustrated with your home search. Waiting to buy will give you an opportunity to save up more funds for a down payment. And that, in turn, will give you more buying power once you are ready to purchase a home.

We don't know what home prices will look like later this year or in a year from now. But what we do know is that right now, they're very inflated and harder to afford. Waiting to buy when the market cools off could be a smart financial decision.