What you need to know about home values and inflation

Homebuyers across the U.S. experienced a rise in inflation in 2022. As home values continue to increase, you may wonder if it’s the right time to purchase or if you should wait until the economy slows down.

Before you even consider buying a house, it’s crucial to research the current housing market and pay attention to what real estate experts say about how inflation affects the real estate market. In this article, we’ll look in-depth at how inflation impacts the real estate market and what it means for homebuyers.

If you want the most accurate estimate of your house’s value, use our home value estimator.

What is Inflation? 

Inflation is the gradual increase in prices of goods and services over a certain period of time, decreasing purchasing power for consumers and businesses. In other words, your money will not go as far today as it did yesterday.

How Does Inflation Impact the Real Estate Market?

As inflation rises, so do house prices, mortgage rates, and other real estate market assets. Historically, as prices skyrocketed, the Fed increased mortgage rates resulting in lower demand and a decrease in house prices. Because the lack of supply and demand is so high, rising interest rates may prevent Americans from buying homes.

Higher Mortgage Rates Decrease Buying Power

Mortgage rates are crucial to the economy: they react and impact inflation rates. Mortgage rates also play a huge part in determining both housing and loan affordability. Most Americans take out a fixed-rate mortgage, usually a 30-year fixed APR, and the interest rate of this type of mortgage remains the same throughout the loan term. Governments usually increase mortgage rates when inflation ratchets up to curb rising housing and decrease inflation. 

Borrowers are now facing increased rates. The 30-year fixed APR mortgage rate is currently 7.23%, compared to 2.8% last year. Because of the higher rate, borrowers have to spend hundreds of dollars per month than they did in the previous year.

Purchasing a House can still be a Better Option 

Rising interest rates are not ideal, but that shouldn’t completely stop you from purchasing a house. Becoming a homeowner still has immense benefits, so buying property should be more about being ready and less about trying to time the real estate market perfectly. 

If you’re ready to buy your first home, get in touch with a Bakersfield mortgage lender to apply for a home loan.

Taking the next steps

When inflation rises, so do housing prices. The U.S. government increases mortgage rates to counter this, as higher rates usually translate to lower demand, resulting in lower housing prices.

During this inflation, it’s still better to buy instead of rent. If you’re ready to buy a home, contact a loan officer from Accelerated Lending Group to apply for a loan.

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.

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