5 Reasons Rising Inflation Could Lead to a Fall in Housing Market Prices

Over the pandemic, the US government fought hard to avoid financial fallout and lower economic output by boosting the economy with stimulus checks and financial support measures.

5 Reasons Rising Inflation Could Lead to a Fall in Housing Market Prices

1) More Expensive Mortgages

When mortgage interest rates increase, a mortgage for a particular value costs homebuyers more. For example, person A might have taken out a 30-year fixed-rate mortgage of $300,000 with an interest rate of 2.5%, meaning they faced monthly payments of $1,449.

2) Reduced Demand for Houses

As mortgages become more expensive, it becomes less appealing to take one out in the first place, as we’ve seen already. This situation is a stark contrast to what home buyers faced in the US a year ago.

3) Smaller Pool of Potential Buyers

The effect of the rise in the federal funds rate on demand is two-pronged. On the one hand, the higher mortgage prices are likely to reduce demand for houses directly — but also, rising inflation has increased the cost of living, meaning there’s a lower number of people who can afford a home right now.

4) Uncertainty

People have been talking about the “uncertainty of current times” over the past few years. For a while, it was the pandemic, and then rising inflation and geopolitical tensions came along to cause even more uncertainty.

5) Property Less Attractive as Investment

Buying a property for investment purposes in the US may not seem like such a good idea, thanks to recent changes. Whereas owning a second home was beneficial for tax breaks in the past, this is no longer the case.

Swipe up now to read the full post!