It is no secret that we’re all feeling the pinch of inflation. No matter where you look, most items we purchase cost us much more than they did just a year ago. Inflation isn’t just affecting gas and groceries; it’s having a massive impact on housing costs.
Inflation and interest rates usually mirror one another, and the current situation is no exception.
The 30- year fixed-rate mortgage jumped to a 5% average this past week – the highest since 2011. This year alone, mortgage rates have increased by over 1.8 percentage points.
Yes, that sounds like a lot, but most of us don’t think in terms of “percentage points.” Translated into layman’s terms, it means that, on average, a homebuyer entering the market now will pay $400 more per month than a year ago for a median-priced home. It’s more than percentage points – it’s real dollars and cents. Impacting buyers entering the market.
Gay Cororaton, research economist at the National Association of Realtors (NAR), recently observed that the average consumer is spending $500 more a month on living expenses than a year ago. Thus, homebuyers may need to lower their budgets to keep pace. Cororaton also adds that house hunters would be smart to search for a home that is about $40,000 cheaper than a year ago because of the rising costs. That $40,000 makes a big difference in the type of property you’re pursuing.
“As Americans contend with historically high inflation, the combination of rising mortgage rates, elevated home prices, and tight inventory are making the pursuit of homeownership the most expensive in a generation,” writes Sam Khater, Freddie Mac’s chief economist. Because of these factors, Dr. Lawrence Yun, NAR’s chief economist, has predicted home sales to decrease by 10% in 2022. Home prices, however, are expected to continue to increase about 5% due to the low inventory of homes for sale.
So, this sounds a bit daunting if you’re looking to enter the housing market, right? Well, while the process might be frenzied, having a realtor who works with you is the best way to help get the right property for you and your family. Realtors work non-stop for their clients and community to help achieve the dream of homeownership.