Home Prices Up 17.4% During 2021's Second Quarter

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.

Home values have soared during the pandemic. Here's what buyers need to know.

If you've been in the market to buy a home, the fact that property values have soared may not come as big news. But you may be surprised to learn just how much they've risen.

U.S. home prices climbed 17.4% during the second quarter of 2021 compared to the second quarter of 2020, according to the Federal Housing Finance Agency House Price Index. The FHFA also reports that home prices rose 4.9% in 2021's second quarter compared to the first quarter. And prices increased in every market among the 100 largest metro areas.

Should higher home prices stop you from buying?

Right now, buyers are in a tough spot. On the one hand, mortgage rates are sitting at very competitive levels, and we don't know how long they'll stay that way. On the other hand, home prices are much more expensive now than they were even earlier this year. That means the savings buyers reap via a low mortgage rate could be wiped out by a higher purchase price.

In fact, in some markets, low mortgage rates may not be enough to compensate for inflated home prices. So buyers could end up losing out financially by purchasing a home today.

Another issue is that right now, housing inventory is very low. That's a big reason why home prices are so high. Buyers have been competing for today's limited properties and driving their prices up in bidding wars.

So where does that leave you as a buyer? Well, can you afford a home, given today's prices? And are you in a great position to snag a low mortgage rate (say, because you have a solid credit score)? If so, then you may want to move forward with your plans to purchase a place of your own. But if you can't comfortably afford a home in a neighborhood you want to live in, then you may want to put your search on hold.

Once more homes hit the market, we could see prices start to come down. That's because once there's more inventory to choose from, buyers won't need to compete as heavily for the same limited properties. So bidding wars should start to decline, and home prices should eventually follow suit, leaving you with less of a mortgage to take out.

Of course, waiting to buy means running the risk that mortgage rates will rise over time. But the good news there is that rates are likely to stay low not only for the rest of 2021, but most likely well into 2022 and possibly beyond. So if you give the housing market a little time, you may find that more homes get added and prices become more competitive.

That said, there's no way to predict whether more sellers will begin listing their homes during the tail end of 2021 or not. A big reason many have held off on selling to date has been uncertainty related to the pandemic. Given where the outbreak is today, that uncertainty isn't going away anytime soon. And while the economy has at least improved, it hasn't fully recovered from an unemployment standpoint.

Still, at the end of the day, it's really not a good idea to bust your budget in the course of buying a home. If moving forward with a purchase today requires you to do that, then you'd be wise to wait for that reason alone.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

Our Research Expert

Related Articles

View All Articles Learn More Link Arrow