Home Prices Soared 18.6% in June, Breaking Record for Major Index

Home values have soared during the pandemic. Buyers today may want to consider putting their home searches on pause.

It's no secret that homes today are being priced higher than usual. But the extent to which prices have risen may be pretty shocking.

In June, home prices rose 18.6% compared to the previous June, according to the S&P CoreLogic Case-Shiller national home price index. That's an uptick from May's 16.8% year-over-year increase.

That 18.6% increase is also the largest annual gain in the history of the index, which dates back to 1987. And now, home prices are 41% higher than they were at their last peak, which happened during the 2006 housing boom.

Why are home prices so high?

The basic laws of supply and demand dictate that when a commodity isn't widely available, demand for it will increase, and prices will follow suit. That's what's happening in the residential real estate market today.

While the supply of available homes has increased slightly in recent months, it was still down 12% in July on a year-over-year basis, according to the National Association of Realtors. Because housing inventory is so limited, buyers are being forced to compete for the same properties. That's caused bidding wars to emerge all over the country, which has contributed to higher home prices.

Should you attempt to buy a home today?

Today's housing market is a difficult one to break into, to say the least. If you buy a home today, you might end up paying a huge premium for it, leaving you with a larger down payment to come up with and a larger mortgage to pay off. Also, because the supply of available properties is so limited, you may have to compromise on some of the things you want in a home, whether it's a finished basement, an updated kitchen, or a larger backyard.

It's for these reasons that you may want to put your home search on hold for a bit, especially if you've been at it for months and have yet to find a home that works for your budget. The benefit of buying a home today is that mortgage rates are sitting near historic lows, so you have an opportunity to lock in an affordable home loan. But mortgage rates are highly likely to stay low not only for the remainder of the year, but well into 2022 and possibly beyond, so waiting to buy may not hurt you in that regard.

Now, we don't know when more homes will start to hit the housing market. But if you pause your search for a while and take a short break, maybe just four or six months, you may find that inventory is more abundant once you're ready to start looking again. And once there's more inventory to choose from, home prices should start to come down.

Of course, if you have a healthy home buying budget and don't mind a lot of competition, then you can always move forward with your plans to buy a place of your own today. But if you've been struggling to navigate the housing market or are afraid to begin a home search, then waiting to buy may be the right call given just how much home prices have risen.