It's brutal out here for home buyers in the second half of 2021. Mortgage rates will rise, home prices will keep going up and buyers will continue to face competition. Here are housing trends to watch for in the final months of the year.

Mortgage rates will likely rise

The 30-year fixed-rate mortgage will rise in the second half of 2021, according to the major forecasters.

Fannie Mae and Freddie Mac predict the rate will rise about two-tenths of a percentage point, the National Association of Realtors expects it to rise three-tenths of a percentage point, and the Mortgage Bankers Association forecasts an increase of half a percentage point.When you average all of their forecasts, the consensus prediction is that the 30-year mortgage will average 3.38% in the last three months of 2021, up three-tenths of a percentage point from the second quarter's average rate of 3.08%.

I agree that mortgage rates will rise between a quarter and a half of a percentage point in the second half of the year as wages increase and the Federal Reserve starts talking about tightening monetary policy.

But I don't have a ton of confidence in this prediction because interest rates are volatile, and there's the possibility that the fight against the pandemic will take one step forward and three steps back. If a resurgence of COVID-19 slows the economy, mortgage rates could stay about the same or fall even lower.

Home prices will keep pushing higher

Sale prices of existing homes skyrocketed in the first half of 2021, according to the National Association of Realtors. The median price of a used home was $363,300 in June — a 23.4% increase from 12 months earlier. The median price was a record high.

The rapidity of price increases in 2021 was unexpected. The springtime consensus among Fannie Mae, the NAR and the MBA was that the median existing home price would be around $331,500 at the end of the year. But June's median price surpassed that year-end forecast by more than $30,000.

Prices rose rapidly because demand exceeded supply. And demand will keep exceeding supply for a long time. Home prices will keep going up in the second half of 2021 and beyond.

Housing demand will remain vigorous

Millennials got a late start. They formed households at older ages than Boomers and Gen-Xers. Now the millennials are beginning to catch up with their forebears as they buy their first homes.

People form households when they occupy a dwelling individually or together. Americans formed an average of about 856,000 households a year from 2013 to 2016, according to research by the Harvard Joint Center for Housing Studies. Then household formation accelerated to an average of 1.3 million annually from 2016 through 2019 (the last year we have statistics for).

This profuse blooming in household formation has its roots in the late 1980s and early '90s, the most fruitful years of millennial births. Those babies are now in their mid-20s to early 30s — peak household-formation years.

On top of rapid household formation, something else is happening: The desire to own instead of rent seems to be intensifying, evidenced by the rapid rise in home prices and the prevalence of bidding wars. This buying frenzy will stick around.

Tamir Poleg, chief executive of startup The Real Brokerage, agrees. "I don't see the market cooling down in the foreseeable future," he says. "Even if interest rates go up, demand will still be significant."

The housing shortage will persist

Not enough houses are available because builders haven't been constructing enough. The shortfall in home construction traces back to the Great Recession. In 2011, just 585,000 homes were completed — less than one-third of the total of five years before, during the housing boom.

Construction has recovered slowly, with 1.287 million homes completed in 2020. Each year for more than a decade, not enough homes have been built to meet the population's needs. Sam Khater, chief economist for Freddie Mac, estimates a shortfall of 3.8 million housing units at the end of 2020.

A shortage of millions of homes can't be resolved quickly. The country is building a little over a million homes a year, and its production capacity might be about twice that. Meanwhile, around 325,000 homes are removed from the housing stock each year, often due to demolition (on purpose) or destruction (by accident).

Home construction is unlikely to accelerate in the rest of 2021. A limiting factor is the shortage of computer chips that control appliances. If you have shopped recently for a clothes washer or refrigerator, you're aware that selection is limited, and the earliest delivery date might be weeks or months from now. Your builder doesn't want to sell a new home without a fridge. Shortages of lumber and other materials, and accompanying high prices, have contributed to construction slowdowns, too.

The Fed will get introspective

Policymakers at the Federal Reserve are worried that their easy-money policies are contributing to rapid house-price increases, and debating whether they should do anything about it.

In the pandemic-era effort to support the economy, the central bank has been buying $40 billion a month in mortgage-backed securities. That keeps mortgage rates low. Low rates, in turn, reduce monthly payments, making it possible for home buyers to take out bigger loans. Bigger loans mean people can pay more, which leads to higher house prices across markets.

But the Fed didn't intend for home prices to rise by double-digit percentages annually. Some Fed policymakers feel chastened by the outcome of their policy.

At the Fed's June meeting, some unidentified members of the committee wondered aloud if they should cut back on mortgage bond purchases sooner to raise mortgage rates and slow the rise of house prices. They didn't make any changes in the June meeting but agreed to keep talking about it.

The Fed strives to be predictable, so it ultimately is likely to decide to reduce mortgage bond purchases on a similar schedule to what it did after the Great Recession.

Bottom line for home sellers and buyers

Home prices are at record highs and buyers frequently find themselves competing with rival bidders. So sellers feel up and buyers feel down.

According to Fannie Mae's Home Purchase Sentiment Index, 77% of respondents said in June that it was a good time to sell — and 64% said it was a bad time to buy. Those attitudes are likely to continue for the rest of 2021 because the supply of homes for sale won't come close to meeting the demand.