Last Updated on January 30, 2022 by Maggie Sutton
By now you’ve probably read the headlines on the impact rising inflation is having on the economy. Read on if you want to know how it is impacting your ability to purchase a home.
What is inflation?
Simply put, inflation is a loss of purchasing power over time: It means your dollar will not go as far tomorrow as it did today. Inflation is the highest its been in nearly 40 years and Americans are suddenly faced with higher prices for everyday things like groceries, gas, and rents. In fact, the Federal Government is so concerned with rising inflation, there are indicators that they will raise interest rates later this year.
Higher interest rates could address inflation by raising borrowing costs and dampening demand — particularly for goods. And for potential homebuyers, efforts to cool inflation could spell higher mortgage rates; yet another barrier of entry for buyers already competing in a hot housing market.
Rising Inflations Rates are Already Here
Mortgage rates are already rising. The average interest rate on a 30-year-fixed rate mortgage has reached 3.22%, according to a Freddie Mac survey. That’s the highest rate since May 2020, and as noted before, its moving higher.
You might expect housing prices to drop or at least cool down as a result. But don’t hold your breath, or wait too long to try to get home. Here’s the thing, mortgage rates still look friendly relative to inflation rates. And, with rents rocketing upwards, it could mean increased competition in an already competitive housing market.
Rising inflation is also a bonus for property owners. The most obvious benefit is the fact that the value of your home rises with the inflation rate. With supply low and demand high, sellers can shoot for the moon with their asking prices, and in many cases, receive offers at or even above that asking price.
This makes it a great time to sell, but a much more difficult time to buy. So if you’re looking to buy, now is much better than later.
Inflation Means Less Money in Your Pocket
And here’s another downside: inflation means that homebuyers will have a lot less money in their pockets to spend. A recent Redfin survey showed that 73% of home buyers and sellers say inflation is influencing their future buying or selling plans. Roughly one in 10 respondents are canceling their plans to buy or sell a home because of inflation, 29% are delaying home-buying plans due to inflation, while 24% are accelerating their plans.
As a result, homebuyers – with less money to spend since prices are rising everywhere and higher mortgage rates will only add further to this dynamic – may have to lower their budgets. And with mortgage rates poised to keep rising, home loans will also be getting pricier.
Homes for Heroes Can Help You Battle Rising Inflation
The great news is that working with Homes for Heroes can help balance out those extra expenses! On average, heroes can save $2,400 when they use a Homes for Heroes real estate and mortgage specialist. These savings are given directly back to you as cash, and can be used to cover anything from closing costs to buying new furniture, or something a little more fun like a vacation. To get started with a Homes for Heroes specialist, sign up here!