Brian Simpson

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How an Expert Can Help You Understand Inflation & Mortgage Rates

September 27th, 2022


Inflationand the Housing Market

This year,inflationreached a high not seen inforty years. For the average consumer, you probably felt the pinch at the gas pump and in the grocery store. It may have even impacted your ability to save money to buy a home.

While theFederal Reserveis working hard to lower inflation, theAugust datashows the inflation rate was still higher than expected. This news impacted the stock market and fueled conversations about a recession. It also played a role in theFederal Reservesdecision to raise the Federal Funds Rate last week. AsBankratesays:

. . .the Fed has raised rates again, announcing yet another three-quarter-point hike on September 21 . . . The hikes are designed to cool an economy that has been on fire. . .

While their actions dont directly dictate what happens with mortgage rates, their decisions have contributed to the intentional cooldown in the housing market. A recent article fromFortuneexplains:

As the Federal Reserve moved into inflation-fighting mode, financial markets quickly put upward pressure on mortgage rates.Those elevated mortgage rates . . . coupled with sky-high home prices, threw cold water onto the housing boom.

The Impact on Rising Mortgage Rates

Over the past few months, mortgage rates have fluctuated in light of growing economic pressures. Most recently, the average 30-year fixedmortgage rateaccording toFreddie Macticked above 6% for the first time in well over a decade (see graph below):


The mortgage rate increases this year are the big reasonbuyer demandhas pulled back in recent months. Basically, as rates (and home prices) rose, so did the cost of buying a home. That pushed onaffordabilityand priced some buyers out of the market, so home sales slowed and theinventoryof homes for sale grew as a result.

Where Experts Say Rates and Inflation Will Go from Here

Moving forward, both of these factors will continue to impact the housing market. Arecent articlefromCNETputs the relationship between inflation and mortgage rates in simple terms:

As a general rule, when inflation is low, mortgage rates tend to be lower.When inflation is high, rates tend to be higher.

Sam Khater, Chief Economist atFreddie Mac, has this tosayabout where rates may go from here:

Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth.The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, . ..

While theres no way to say with certainty where mortgage rates will go from here, there is something you can do to stay informed, and thats connect with a trusted real estate advisor. They keep their pulse on whats happening today and help you understand what the experts are projecting. They can provide you with thebest advicepossible.

Bottom Line

Rising inflation and higher mortgage rates have had a clear impact on housing. For expert insights on the latest trends in the housing market and what they mean for you, lets connect.

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Disclaimer : The views and opinions expressed in this blog are those of the author and do not necessarily reflect the official policy or position of the Houston Association of REALTORS®

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