How an Expert Can Help You Understand Inflation & Mortgage Rates
If you’re following today’s housing market, you know two of the top issues consumers face are inflation and mortgage rates. Let’s take a look at each one.Inflation and the Housing MarketThis year, inflation reached a high not seen in forty 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 the Federal Reserve is working hard to lower inflation, the August data shows 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 the Federal Reserve’s decision to raise the Federal Funds Rate last week. As Bankrate says:“. . . 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 don’t directly dictate what happens with mortgage rates, their decisions have contributed to the intentional cooldown in the housing market. A recent article from Fortune explains:“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 RatesOver the past few months, mortgage rates have fluctuated in light of growing economic pressures. Most recently, the average 30-year fixed mortgage rate according to Freddie Mac ticked above 6% for the first time in well over a decade (see graph below):The mortgage rate increases this year are the big reason buyer demand has pulled back in recent months. Basically, as rates (and home prices) rose, so did the cost of buying a home. That pushed on affordability and priced some buyers out of the market, so home sales slowed and the inventory of homes for sale grew as a result.Where Experts Say Rates and Inflation Will Go from HereMoving forward, both of these factors will continue to impact the housing market. A recent article from CNET puts 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 at Freddie Mac, has this to say about 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 there’s no way to say with certainty where mortgage rates will go from here, there is something you can do to stay informed, and that’s connect with a trusted real estate advisor. They keep their pulse on what’s happening today and help you understand what the experts are projecting. They can provide you with the best advice possible.Bottom LineRising 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, let’s connect.
The True Strength of Homeowners Today
The real estate market is on just about everyone’s mind these days. That’s because the unsustainable market of the past two years is behind us, and the difference is being felt. The question now is, just how financially strong are homeowners throughout the country? Mortgage debt grew beyond 10 trillion dollars over the past year, and many called that a troubling sign when it happened for the first time in history.Recently Odeta Kushi, Deputy Chief Economist at First American, answered that question when she said:“U.S. households own $41 trillion in owner-occupied real estate, just over $12 trillion in debt, and the remaining ~$29 trillion in equity. The national “LTV” in Q2 2022 was 29.5%, the lowest since 1983.”She continued on to say:“Homeowners had an average of $320,000 in inflation-adjusted equity in their homes in Q2 2022, an all-time high.”What Is LTV? The term LTV refers to loan to value ratio. For more context, here’s how the Mortgage Reports defines it:“Your ‘loan to value ratio’ (LTV) compares the size of your mortgage loan to the value of the home. For example: If your home is worth $200,000, and you have a mortgage for $180,000, your LTV ratio is 90% — because the loan makes up 90% of the total price.You can also think about LTV in terms of your down payment. If you put 20% down, that means you’re borrowing 80% of the home’s value. So your LTV ratio is 80%.”Why Is This Important?This is yet another reason we won’t see the housing market crash. Home equity allows homeowners to be in control. For example, if someone did need to sell their home, they likely have the equity they need to be able to sell it and still put money in their pocket. This was not the case back in 2008, when many owed more on their homes than they were worth.Bottom Line Homeowners today have more financial strength than they have had since 1983. This is a combination of how homeowners have handled equity since the crash and rising home prices of the last two years. And this is yet another reason homeownership in any market makes sense.
![Fall Home Selling Checklist [INFOGRAPHIC],KCM Crew](https://img.chime.me/image/fs/chimeblog/20220929/16/w600_original_c7ab50a5-b278-45da-aeb3-3293436c35a3-png.webp)
Fall Home Selling Checklist [INFOGRAPHIC]
Some HighlightsWhen it comes to selling your house, you want it to look its best inside and out so it catches the attention of buyers. A real estate professional can help you decide what to do to make that happen.Focus on tasks that can make it inviting, show it’s cared for, and boost your curb appeal.Let’s connect so you have advice on what you may want to do to get your house ready to sell this season.
What Experts Say Will Happen with Home Prices Next Year
Experts are starting to make their 2023 home price forecasts. As they do, most agree homes will continue to gain value, just at a slower pace. Over the past couple of years, home prices have risen at an unsustainable rate, leaving many to wonder how long it would last. If you’re asking yourself: what’s ahead for the price of my home, know that experts are now answering this question, and its welcome news for homeowners who may have been led by the media to believe their home would lose value.Historically, home prices have appreciated at a rate near 4%. For 2023, the average of six major forecasters noted below is 2.5%. While one, Zelman & Associates, is calling for depreciation, the other five are calling for appreciation. The graph below outlines each expert forecast to show where they project home prices are going in the coming year.To understand why experts are calling for appreciation next year, look to the economics of supply and demand. Dave Ramsey, Financial Expert, says this:“The root issue of what drives house prices almost always is supply and demand . . .” Two things are driving home prices upward. First, the undersupply of homes on the market is an issue we continue to face in this country. We still don’t have enough homes on the market for the number of people that want to buy them. To further that point, we’re still in a sellers’ market nationally, and in that scenario, home prices tend to appreciate.Second, millennials are moving through their peak homebuying years. Since they’re the largest demographic behind the baby boomers, demand isn’t going away any time soon.Bottom LineExperts are calling for home prices to appreciate next year, although at a slower pace than the previous three years. The reason for this is simple. The dynamics of supply and demand are playing out in real estate and will continue for many years to come.
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