Inflation and Mortgage Rates

Inflation and Morgage Rates

A couple of issues that are top of mind for consumers in today’s housing market are inflation and mortgage rates. What the heck is going on?!

So far this year, inflation reached a high of 8.6% which is a high we haven’t seen since 1981.  The economic crisis has been felt by all of us at the gas pump and in the grocery store. And it may have even impacted your ability to save for a down payment on a new home. 

So you may be wondering …. what the heck is going on with the housing market?  Perhaps you’re a seller and you haven’t had very many showings, or your house is still sitting on the market after 15 days.  Well …. The Federal Reserve has been trying to cool off the housing market that’s been on fire and it appears they are succeeding.  Although their decision to increase rates does not directly dictate what happens with mortgage rates, their decision definitely contributes to what the financial markets do and puts pressure on mortgage rates and what buyers are doing.

 Every Thursday, Freddie Mac publishes interest rates, and they have been fluctuating.  For the first time in 14 years, the average 30 year fixed rate mortgage was above 6% . 

Has buyer demand pulled back a bit?  You bet it has.  With rising interest rates coupled with high home prices, some buyers have been priced right out of the market and they’re like …. Let’s go sit on the fence awhile …. Well, not literally, but …. You know …. But they are putting on the brakes,  And this my friends has caused home sales to slow down and the number of homes for sale to grow.    

 What do the experts think will happen to rates?

According to a recent article from CNET they say this: "“as a general rule, when inflation is low, mortgage rates tend to be lower.  When inflation is high, rates tend to be higher.”

 According to Freddie Mac’s chief economist Sam Khater, “the high uncertainty surrounding inflation and other factors will likely cause rates to remain variable.”

 So basically … they don’t have a crystal ball and can’t tell what’s going to happen to mortgage rates going forward, but I can tell you this …. Rising inflation and higher mortgage rates has had a clear impact on housing, and I keep a pulse on what’s going on and will keep you informed on what’s happening in our local market. 

If you would like a more detailed analysis of what is going on in the Kalamazoo County housing market so that you're more informed, check out my monthly market update video for October.   

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