It’s no secret we’re all feeling the pinch of inflation. No matter where you look, most of the items we purchase – gas, groceries, etc. – cost us much more than they did just a year ago. Inflation also is 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 more than 1.8 percentage points.
That sounds like a lot but very few of us think in terms of “percentage points.” Translated into layman’s terms, it means most of the homebuyers entering the market 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.
Gay Cororaton, research economist at the National Association of Realtors, recently observed that the average consumer is spending $500 more a month on living expenses than a year ago. Thus, homebuyers might need to lower their budgets to keep pace.
Cororaton added that house hunters would be smart to search for a home that’s 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.
These factors have led Lawrence Yun, NAR’s chief economist, to predict home sales will 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.
This sounds a bit daunting if you’re looking to enter the housing market, right? 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 nonstop for their clients and community to help achieve the dream of homeownership. 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’s one of approximately 600 MLSs in the country and services more than 2,700 users.