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Inflation and the housing market: skyrocketing prices, what to do

Inflation and the housing market: skyrocketing prices, what to do

Inflation and the housing market: skyrocketing prices, what to do


With yet another dismal inflation report in June, homebuyers and sellers continue to face the stark reality that home prices, which should cool this year, may not slow for some time. The question for people looking for condos right now is: Should we wait for this period of price increases?

What the inflation report reveals

Analysts were confident that inflation would pick up year-over-year in June, and they weren’t disappointed: The headline figure rose to 9.1% last month, compared with 8.6% in May, affecting everything from gas to gas. housing costs. That includes mortgage rates, which hit 6% in June but recently dropped to mid-5%.

To get inflation back on track, the Fed has steadily raised interest rates — three times so far this year, with another planned for late July. These measures indirectly affect mortgage rates.

While we may not see such a dramatic increase in interest rates for the rest of the year, recent rates have boosted monthly mortgage payments by 51% since last May, according to the National Association of Realtors. %. Combined with soaring house prices, it means “unaffordable”, especially for first-time buyers.

What’s happening in the real estate market

Nationally, home prices rose 20.2% year-over-year in May, CoreLogic reported. While rising mortgage rates should slow the trend, housing remains tight and inflation is not helping.

This imbalance is causing concern among homebuyers who already have limited options at affordable prices and now have less purchasing power amid higher interest rates. The Fannie Mae index, which measures homebuying sentiment, recently hit its second-lowest level in 10 years, with just 20% of respondents saying now is a good time to buy a home. A record 81% believe the economy is “on the wrong track”.

Homebuyers are also not feeling great about their prospects.

Should you wait for inflation to drop?

With inflation still weighing on the economy and the housing market, should you buy a home now? How about selling the house now?

If you can’t get the numbers to work, wait for things to wrap up instead of buying a home today to beat rising prices and rates, especially if you’re a first-time buyer. While you’ll delay building equity, you may find that you’ll be in a better position to buy when the market cools and your income may have a chance to grow.

“A fall in parity inflation again doesn’t mean prices will fall; it just means prices won’t rise as fast,” McBride said. “For homebuyers, a more modest pace of appreciation, or even a period of stagnant house prices, could lead to sustained income growth. Rather than stretch too far now, when your income growth outpaces house price growth in a few years, You can buy more comfortably. But there are no guarantees and rents are definitely skyrocketing right now.”

However, your living circumstances may require you to buy a home now, for any reason that is acceptable. Since you’ll be buying at or near peak market times, be prepared to spend some time at home if you want to get a head start on sales.

Or sellers, the tide is turning. Depending on where you live, you may find fewer recipients or need to lower prices. Let’s not forget what’s going on on the other end of the deal: When you buy your next home, you’re competing for a limited number of available properties — and now you’re likely to get a new mortgage at a higher rate.

If you want to buy now, you can try to increase your funds by:

  • Invest your down payment savings in a high-yield account – the positive side of inflation and the Fed’s response: higher interest rates on savings accounts. If you haven’t already, put your deposit contributions into a high-yield account. Just make sure the account gives you easy access to your funds when closed – some online savings accounts take three days to deliver your funds when you withdraw them.
  • Consider a low-fee or no-fee mortgage lender—while it may be more convenient to get a mortgage from a bank, banks typically charge a processing fee, usually 1% of the loan amount. Many non-bank and online lenders don’t. So if you can find a free lender with attractive rates, you’ll have more money in your pocket.
  • Set your interest rate – When you find a lender and are ready to apply for a loan, ask about your interest rate setting. Despite the slight drop in prices, buyers still need some time to find a home. Now is not the time to risk paying an unexpectedly unaffordable mortgage.

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