As inflation continues to rise in the U.S., the effects are rippling through the housing market. Let’s look at how consumers in this market are reacting to rising prices.
Some Buyers Are Speeding Up, Others Are Hitting the Brakes
The Mortgage Bankers Association predicts that average interest rates will top 4 percent by the end of 2022. Inflation plays a part in this, and conventional wisdom says we’ll see homebuyers moving quickly to get current pricing before rates go even higher. But not with everyone. Lots of first-time homebuyers – and many millennials – may wait to see if these rising mortgage rates cause home prices to drop, according to forecasters at the National Association of Realtors.
Inflation’s Divergent Impact
A recent survey by Redfin found that inflation is changing the behavior of would-be homebuyers – a whopping 73 percent of them! But in different ways. While 29 percent of potential homebuyers play to delay their purchases due to concerns about inflation and its effects, 24 percent of the same group are hastening their plans. There is overall agreement that rising gas prices are being factored into home-buying decisions, with 73 percent of respondents saying the cost of commuting is a consideration in deciding where to live.
Even Experts Are Divided
The pandemic, which is at the heart of inflation globally, has taken the US into strange territory; Fannie Mae’s chief economist Douglas G. Duncan tells The New York Times, “Every forecast will be wrong.” As the Federal Reserve makes moves to curb inflation, the related rise in interest rates may not mean falling home prices as it has in the past. A recent study published by the American Economic Journal found that most potential homebuyers are willing to pay about the same prices for homes even if rates jump to 6.5 percent – a sign that competition among buyers is on the horizon, keeping home prices high.
Whether you’re looking to receive a home mortgage today or considering it in the near future, Luxury Mortgage is here for your financing needs. Contact one of our specialists to get started.
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