During the pandemic, home demand spiked, and inventory plummeted, which made for a red-hot seller’s market. However, the housing market has been cooling down, and inventory has been steadily rising again due to long-term active listings, according to Andrew Shader.
Inflation is rarely a good outcome for anyone, but one particularly unfavorable result of current rising inflation rates is the concurrent increase in mortgage rates. In fact, this increase in mortgage rates has worked alongside rising numbers of available homes on the market to swing trends more favorably toward the buyer than the seller.
Inflation Never Helps Rates of Long-Term Interest
Thanks to increasing inflation rates, 30-year fixed mortgages have doubled since this time last year, which has temporarily edged many potential home buyers out of the market altogether. During November of 2022, the average home financing rate briefly increased to more than 7% before dropping back to its previous range in high 6%.
The fact is, as long as inflation rates rise, so will mortgage rates. Unfortunately, the two are closely linked. However, all hope isn’t lost; according to indications over the past several weeks, as 2022 comes to a close, the inflation rate that has been on a steady incline may finally be trending more toward a decline.
This reversal means that real estate professionals and economists alike are cautiously optimistic about seeing decreases in mortgage rates over the next several months.
The effects that increased inflation can have on different aspects of the economy, including the housing market, can take time to even out again after inflation rates start to dip.
While mortgage rates will still likely be higher than average during the first part of 2023, trends are showing that these rates will come down eventually as long as inflation declines remain constant.
What Does the Future of Mortgage Rates Look Like?
Mortgage rates affect everyone involved in the real estate market. High mortgage rates may make buyers reconsider and wait until they can secure a better monthly cost, which means that sellers will have a more difficult time finding a buyer for the right price during a period like this.
This effect means that low mortgage rates are ideal all around. They make buying easier for those looking to acquire a home, and they make finding the right buyer easier for sellers. Though mortgage rates are still significantly high, thanks to inflation and other factors, they won’t be this high forever.
Swings in both directions are to be expected within the housing market, but the unprecedented effects of the pandemic are still playing themselves out within real estate as well as the economy as a whole. Over time, inflation will continue to decrease, and so will mortgage rates.
Who Is Andrew Shader?
As a professional in the real estate community, Andrew Shader has extensive experience delivering optimal outcomes for everyone he works with. He makes it his goal to significantly increase property values for each client.
