5 things you need to know about today's housing market

U.S. homes, even in the most affordable neighborhoods, continue to climb in price — ultimately deterring more homebuyers from taking the plunge. 

During the pandemic, demand in America's heated housing market continues to outstrip supply, causing prices to surge. It's a problem that hasn't gone away, according to real estate brokerage Redfin. 

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Not only are homeowners desperately seeking out additional space provided by a single-family home but they are looking to capitalize on historically low mortgage rates with the average rate on a 30-year fixed mortgage around 3%. 

"Buyers found that they could purchase with very low-interest rates and lock in these rates for a long term," Kristin Ehrgott, founding broker of the Live Here Property Group at Compass, New Jersey, told FOX Business. "This means that their budget can stretch higher on the purchase price of the home while still keeping their mortgage payments low for up to 30 years." 

This, among other factors, "is what caused the values of homes to increase rapidly and created the bidding wars," Ehrgott added. 

In fact, residents across the country are so desperate to nab a home that a record-high 51% of homes sold for more than their list price in the four-week period ending May 23, 2021, according to data collected by Redfin, which analyzed more than 400 metro areas nationwide.

And while the competition is finally starting to settle, mainly due to climbing prices, there are still many variables homeowners should be aware of when trying to purchase a home, according to the brokerage.

Here are the top 5 things homeowners should be aware of: 

1. We aren’t in a housing bubble 

According to Redfin, the U.S. is not in the midst of a housing bubble, which is when the market price of homes sharply increases due to rising demand that outpaces supply. 

"The spike in home prices since the onset of the pandemic isn’t an indication of a bubble because the demand is coming from well-funded buyers who are competing for very few homes," Redfin said. 

2. Competition is easing

The once-intense competition to nab a home is declining as more homeowners postpone their housing search, according to Redfin. The brokerage noted that many homeowners were either burned out from their search or "priced out." 

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In some cases, homeowners were more inclined to use their funds for travel and dining out now that pandemic restrictions are being lifted, according to the brokerage. 

3. Home prices are still climbing 

Although there is less competition in the market, "homebuyers still have to make their offers stand out," according to Redfin. 

To do so, homeowners will likely have to shell out more cash, effectively driving up housing prices even more. 

However, in order to better navigate the market, Ehrgott noted that consumers shouldn't rely on asking prices as a "good gauge of the values of a market" rather than recently sold prices. 

"So pay much less attention to the percent over asking or under asking that a property sold and look at what it sold at compared to the most recent comparable sale," she said. 

4. Relatively affordable places are getting more expensive

Certain cities around the country such as Phoenix, Las Vegas and Sacramento have been popular destinations for homebuyers. 

However, with prices rising, these once-affordable spots are falling out of reach for not only newcomers but locals as well, according to Redfin. 

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5. There aren’t enough homes for sale 

Supply remains a big issue. In fact, some homeowners won't even place their home on the market out of fear of "entering the high-priced market as a buyer," according to Redfin. 

Additionally, "builders are held back by high lumber costs and labor shortages," the brokerage said, adding that this is creating an unbalanced market. 

Prices and competition won't settle until the "market is more balanced." 

However, Ehrgott cautioned that even when the price declines in the near future, homeowners benefitting from low mortgage payments for the long term "will likely wait out the market and not sell until they gain equity back." 

As a result, the inventory of available homes will remain low "and therefore prevent any sort of substantial drop in values because there will always be enough demand from buyers who have a required move for relocation, more space, less space," Ehrgott said. 

The Associated Press contributed to this report.