• Low mortgage rates and the desire for COVID-era comfort have fueled home-buying during the pandemic.
  • The frenzy has depleted inventory and ratcheted up housing prices.
  • Buying property right now could mean overpaying for a place you're settling for anyway.
  • See more stories on Insider's business page.

Just because all your friends jump off a bridge doesn't mean you should, too.

This ominous parental warning seems apt for the times: Millions of Americans have taken the plunge into homeownership over the last year, but that may not be the right decision for everyone.

Home prices nationwide are hitting unprecedented peaks, propelled by low mortgage rates. The underlying problem is a grave imbalance between supply and demand. The infinitesimal number of homes for sale is outweighed by the enormous pandemic-fueled desire for a home of one's own. Stay-at-home orders reminded people how much they crave bigger, better spaces to quarantine.

"Frankly, it may not make sense to buy at this moment," said Scott Trench, the CEO of the real-estate-investing resource BiggerPockets. "Frantically trying to buy 'something' is a great way to make a bad purchase."

Case in point: A LendEDU survey from last fall found that many newly minted homeowners were already regretting their decisions to buy. About 55% of Americans who purchased homes during the pandemic almost immediately reported buyer's remorse. About 30% of those respondents cited financial reasons.

That's because buying a home is quickly becoming financially unattainable for the average American as the pandemic wears on. With so many house hunters on the prowl, competition has gotten fierce — bidding wars are scarily common, with many desperate buyers resorting to all-cash offers, waiving inspections, or forgoing appraisals to win them.

The average homebuyer needs to offer above asking price right now just to nab a property.

"So should you join the trend and buy? Hell, no. This is a sellers' market, meaning you should just say no. Wait until things return to normal, then make your move," said Larry Light, an investing journalist, in a September Forbes column. "This situation is heaven for homeowners who want to cash in on an overpriced market. Just not for you, the prospective buyer."

There aren't that many homes to choose from: The National Association of Realtors recently estimated that existing housing inventory could run out in two months — a record-short time frame. There are more real-estate agents in the US (1.45 million) than there are homes for sale (1.04 million), The Wall Street Journal reported.

Experts expect inventory to stay tight. Owners are wary to list their homes for fear of not finding a suitable, appropriately priced place to move into after they sell — and those fears are exacerbated by the lingering pandemic. Especially in 2020, folks were reticent to move and risk contracting the virus.

"Every additional home that gets pulled off the market incentivizes someone else not to sell their house," Ralph McLaughlin, an economist at the housing-finance startup Haus, told The New York Times.

As inventory dwindles, home prices continue to soar.

Home prices have been shooting up for years — and at a steeper rate than they did ahead of the 2008-era Great Recession — and they're primed to keep on rising.

The think tank American Enterprise Institute found that home prices appreciated at a national average of 12.1% in January. That percentage, AEI estimated, could increase to 14% in the spring. "Home prices are responding to sharply lower interest rates and the lower months' remaining inventory for new and existing homes," said Ed Pinto, the director of AEI's housing center.

The median price of homes sold in February hovered around $313,000, a 15.8% year-over-year increase, NAR reported. They're getting snatched up fast too: Properties also typically sold within 2o days of listing — a record low.

"Sales easily could have been 20% higher if there had been more inventory and more choices," Lawrence Yun, NAR's chief economist, said.

That leaves today's house hunters touring the few properties for sale that are likely overpriced and that may not tick all their boxes.

Many don't even see homes they're buying in person because of the time crunch. A recent Redfin report found that more than half of homebuyers last year — a whopping 63% — made offers on properties sight unseen, painting an even more competitive picture of the market.

"Buyers have learned that if they aren't aggressive enough one week, they will have to bid higher on a home that's listed the following week," Redfin's chief economist, Daryl Fairweather, said.

It's risky. The higher prices mean that people lose out on any additional buying power afforded by lower mortgage rates. And if Americans keep spending more money than they budgeted on whatever few homes happen to be for sale without ever seeing them in person, they could be setting themselves up for disappointment.

The best course of action could be to steer clear of the market until it simmers down.

That's what Liz Knueven, a personal-finance reporter at Insider, decided to do last year when house-hunting in Ohio.

"One recently renovated home I loved in Cincinnati's Silverton neighborhood — a fairly quiet market compared to more up-and-coming neighborhoods — didn't even stay on the market for a full weekday. When I found it listed on Zillow on Monday morning, the home already had a full day of showings booked," she wrote. Knueven added, "It's made for a competitive environment in Cincinnati, and likely the rest of the US, too."

She concluded, "I'm willing to wait."

House-hunting hopefuls such as Knueven can prepare to buy by establishing an emergency fund, determining how much to budget, and getting preapproved for a mortgage.

That way, Trench said, they're ready to "act when the right property hits the market."

Be warned, it might take quite some time.