Like many people, I have been interested in the coverage of world events over these past few weeks. The heartbreaking images and stirring courage shown by the Ukrainian people is inspiring. The images and daily events like these impact all of us and their impact can't be measured in mere dollars and cents, and it's true that these tensions have had a worldwide effect.
Before the Ukrainian crisis, gas prices and inflation were already trending upward, and we have all experienced pain at the gas pump in recent weeks.
Much like what is happening on the other side of the globe, the rising fuel costs have long-reaching implications. Considering the real estate industry revolves around meeting clients and showing properties, the pain at the pumps have certainly been an expense that most realtors and consumers are having to face on a daily basis. While the increase in prices for goods and services are also on the rise, we have reached a time that our hard earned dollars are getting us less and less.
The relationship between inflation and interest rates is similar in that one impacts the other and can have long-term impacts. With mortgage rates jumping above 4 percent to their highest level since April 2019, Nadia Evangelou, senior economist and director of Forecasting for the National Association of Realtors, paints the picture of a challenging season, especially for first-time homebuyers in the current housing market. The Increase in the median home price and low inventory locally has made this one of the most challenging times in recent history for many consumers who are searching for their dream in home ownership.
“These higher mortgage rates will affect many home buyers, especially first-time home buyers. Since the beginning of the year, nearly 6.3 million households have already been priced out of the markets.” Nearly two million of these households are millennials who are struggling with finding a way into the market with new hurdles of an increased cost of living, rising home prices and housing supply at record lows locally and nationally. There is some good news though, with homebuying activity that typically increases in the spring due to increased homes being listed on the market that historically peaks in June. Locally, we are still projecting the housing market to outperform previous year’s sales. “Nationally, NAR expects home sales to be 10 percent higher in the next six months compared to the same period in 2019," says Ms. Evangelou.
She adds, “Specifically, the 30-year fixed mortgage rate rose to 4.16 percent from 3.85 percent this previous week. Experts at NAR have signaled multiple times before that mortgage rates would rise in response to the Federal Reserve's strategy of raising short-term interest rates.
“While the next few weeks will be unpredictable as markets continue to churn, the outlook is for mortgage rates to rise even higher. The Federal Reserve indicates more interest rate increases by the end of the year. However, NAR predicts that inflation will eventually start slowing down sometime later this year. The Federal Reserve forecasts inflation to average 4.3 percent in 2022. NAR expects mortgage rates to average around 4.3 percent at the end of the year.”
If you are in the market to purchase a home, then now is the time to stay in contact with your lender to ensure that you are informed on the rates and programs being offered.
Friends and clients might be used to me saying this, but if someone is looking to enter the housing market, the time might be now. Locking in these interest rates while they are lower will certainly increase the amount of a home someone can purchase. A few percentages of a point can potentially make or break many dollars of difference each month, acting quickly is imperative.
There is so much to factor in when purchasing or selling a home. That’s why utilizing a realtor for your homebuying or selling needs is so crucial. Realtors help their clients and communities every day. That’s Who We R.