What Is Inflation?

Inflation essentially is an increase in the prices consumers pay for goods and services. From the point of view of a single self-interested consumer, you never want to see inflation because it means the money that you already have in your possession is worth some amount less than it was when you originally earned it. But from a macro view, some inflation is good.

In a healthy economy, there should theoretically always be some inflation. If prices tend to go up over time, it encourages people to buy goods, services, and even houses now rather than waiting for some later date. This means there’s plenty of work for producers. This allows them to continue hiring people, who buy goods and services of their own.

The key is keeping a lid on inflation. You don’t want a can of soda that used to be $1.50 from the vending machine to suddenly cost a $5 bill. Another place we tend to usually see inflation show up first is the gas pump and this tends to generate headlines as well. The Federal Reserve has said its long-run goal is for inflation to be around 2% annually.

“By keeping interest rates this low for this long, what they’ve done is they’ve created an everything bubble. It’s not just the housing market,” Desmond Lachman, a senior fellow at the American Enterprise Institute.

Even in this crazy market, you can still snag a great home if you play your cards right and make sure the numbers work for you. It’s especially important to work with a full-time local Realtor. Full-time Realtors are constantly networking with other agents and often know of upcoming/off-market inventory that can only be found by word of mouth. When it comes to writing an offer, listing agents often put a strong amount of consideration into who is representing the buyers. (Hence our slogan; Who you work with Matters!)

Cons

• The intense seller’s market means buyers need to be prepared for bidding wars and to lose out on multiple properties before finally sealing a deal.

• You may need to reevaluate your budget or must-have list: Most homes sell over-asking these days, so your dollars may not go as far as you hoped.

• You could see your property value decline after you close once the market cools off, but experts say a trend toward foreclosure is not on the horizon, and if you’re buying your forever home, the value should eventually recover.

Pros

• Mortgage rates have never been lower. You may have to pay more for your house than you’d like to, but your borrowing costs will be lower, so you may be able to afford that bigger loan without having to stretch too much.

• Although home prices are high, most experts say this current housing cycle should not be a repeat of 2008, when the bursting bubble triggered the Great Recession. If you buy now, you may see some short-term losses if you try to sell the property again too soon, but there shouldn’t be a huge wave of foreclosures like there were a decade ago.

Why I would buy a home during inflation

Although it might make sense that rising interest rates may bring home prices down, it will also greatly affect the purchasing power of homeowners that plan to use a mortgage. During inflation, the money you had yesterday is worth a little less today. If you can lock down a 30-year loan with a low interest rate and a monthly payment that you are comfortable with, then it is a great time to buy.

The first step would be contacting a lender to see what your options are. Feel free to reach out to us for a referral, we have a couple of amazing lenders that can help you!