Like many people, I’ve been interested in the media’s coverage of world events over the past several weeks. While the images have been heartbreaking, the courage of the Ukrainian people has been inspiring.
These events have affected people around the world, although their impact can’t be measured in mere dollars and cents.
Gas prices and inflation were already trending upward before the Ukrainian crisis. Considering the real estate industry revolves around meeting clients and showing properties, most Realtors are now facing pain at the pump on a daily basis.
Much like what’s happening on the other side of the globe, rising fuel costs have far-reaching implications. With the prices for goods and services also climbing, we’ve reached a point where 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 effects. With mortgage rates jumping above 4% to reach their highest level since April 2019, Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, paints a picture of a challenging season, especially for first-time homebuyers.
“Higher mortgage rates will affect many homebuyers, especially first-time buyers. Since the beginning of the year, nearly 6.3 million households have been priced out of the markets,” Evangelou says.
“Nearly 2 million of these households are millennials who are struggling to find a way into the market while facing the hurdles of a higher cost of living, rising home prices and housing supply at record lows locally and nationally.”
The increase in the median home price and low inventory locally has made this one of the most challenging times in recent history for consumers who are searching for their dream of home ownership.
There is good news, though. Homebuying activity typically increases in the spring due to more houses being listed. Locally, we’re still projecting the housing market to outperform last year’s sales.
Evangelou anticipates the same nationally.
“The NAR expects home sales to be 10% higher in the next six months compared to the same period in 2019,” she notes.
While that’s great to hear, the 30-year fixed mortgage rate recently rose to 4.16% from 3.85%. And Evangelou expects even more increases.
“While the next few weeks will be unpredictable as markets continue to churn, the outlook is for mortgage rates to rise even higher,” she continues.
Experts at the NAR signaled multiple times that mortgage rates would rise in response to the Federal Reserve’s strategy of raising short-term interest rates.
Although Federal Reserve is looking at even more interest rate increases by the end of the year, the NAR predicts inflation will begin to slow down sometime later this year, Evangelou adds.
“The Federal Reserve forecasts inflation to average 4.3% in 2022. The NAR expects mortgage rates to average around 4.3% at the end of the year,” Evangelou concludes.
If you’re in the market to purchase a home, stay in contact with your lender to ensure you’re 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’re lower will certainly increase the amount of a home someone can purchase. A few percentage points can potentially make or break many dollars of difference each month, so acting quickly is imperative.
There’s so much to factor in when purchasing or selling a home. That’s why utilizing a Realtor for your homebuying or selling needs is crucial. Realtors help their clients and communities every day. That’s Who We R.
Founded in 1912, Greater Chattanooga Realtors is a regional organization with more than 2,500 members servicing Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. The association is one of approximately 1,100 local associations and boards of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors owns and operates a Multiple Listing Service that is one of approximately 600 MLSs in the country and services more than 2,700 users.