How Inflation Is Affecting The Housing Market

In this blog, we will discuss and cover how inflation is affecting the housing market in 2022.  As we approach the Fourth of July holiday in America in 2022, it is next to impossible to live a day without hearing the term inflation. The economic term inflation is taught to us in our school curriculum, but many of us are not familiar with how inflation affects our day-to-day lives. Inflation is when the price of a good or service increases. As the general price levels rise, each dollar or unit of currency will now buy fewer goods and services.

Inflation and the Housing Market

Unfortunately, inflation corresponds to a reduction in purchasing power. Meaning your dollar will no longer buy the same amount of goods or services. If you have tried to make any major purchase over the last few months, you are more than likely running into extreme inflation. Compared to just one year ago, the price of food has increased by over 10%. If you are shopping for a vehicle, you can expect to pay approximately 14% more compared to last year.

Inflation and Home Prices

As we come out of the coronavirus pandemic and want to travel, you are seeing incredibly high travel costs. The price of a hotel has gone up by over 20%. Airfare has gone up over 37%. This is driven significantly by the cost of gas which is nearly doubled from the pandemic lows. The costs of diesel fuel have sent ripples down the economy, sparking inflation. The stock market has just recorded the worst 6-month period since 1970! Many readers of this blog have not seen such alarming economic times in their lives.

Inflation Versus Housing Prices Comparison

Gustan Cho Associates understand the extreme pressure inflation is putting on Americans. We also understand the significance this is having on the housing market. Even before record inflation, saving for a down payment was the hardest hurdle to jump over in order to purchase a home. With the purchasing power of Americans falling in nearly every sector of the economy, buying a home is harder than ever. In this blog we will detail how buying a home can help fight against inflation, areas of the country that currently have the lowest housing costs, and how to apply for a mortgage loan with Gustan Cho Associates.

Real Estate Prices During Inflation

Owning a home can help combat inflation for a few different reasons. Mainly, the most popular mortgage program in the United States is a 30-year fixed-rate mortgage program. This means you can lock in your housing payment for 30 years and your payment cannot change. If you have been renting for years, you have more than likely seen your rent increase every year or increase at some time frame. If you purchase a home with a 30-year fixed mortgage, the only way your total housing payment will change is if you have an increase in your annual property taxes or homeowners insurance policy.

Effects of Inflation on the Housing Market

If you are renting a home, your landlord has the ability to raise the rent on you every time you renew your lease. If you decide not to renew, you then endure the costs of moving every time you rent a new place. That is why loving into a 30-year fixed mortgage is a great idea for long-term financial success. If you are renting a home, and the cost of property taxes and or insurance increases, do you think your landlord is simply going to eat that cost? The realistic answer is no, those increases will be passed around and your housing payment increases. When you own your home, every monthly payment will pay down the principal balance you owe, creating equity in an asset. When you make a rent payment, your landlord gets the equity.

Does Inflation Negatively Affect Housing Prices

Since your home is also a tangible asset, this usually will increase in value over time. As stated above, owning a home can provide immediate shelter over inflation but can also protect you over the long term. Recent history shows that inflationary pressures can and will increase the cost of living and typically home values will appreciate at a rate that outpaces inflation. Even with record inflation year over year, housing costs rose by nearly 25% since the start of the pandemic. Homes can also be passed down to your children which can provide financial security. Your children may benefit from the short-term effects of owning a home or inheriting a rental property to continue to generate income. While there have been crashes in the housing market, historically speaking, appreciation of homes has outpaced inflation!

Benefits of Owning a Home During Economic Uncertainty 

Some other benefits of owning a home are the ability to borrow money against your property. During hard economic times, you may need access to additional financial resources other than just your sources of income. Depending on the value of your home, you may have the ability to access the equity through a cash-out refinance or a second mortgage. You may have access to a home equity line of credit. Having access to collateral can give you peace of mind.

A Mortgage Is an Excellent Tradelines to Have

Owning a home will also improve your credit score. The majority of homeowners have a mortgage reporting on their credit report. In the eyes of the credit bureaus, mortgage debt is considered good debt and will help build your credit score. Assuming you have on-time payments to your mortgage, this is a great way to establish good credit. As long as payments are made on time, a mortgage will get your credit score a huge boost.

 Areas of The Least Impact Inflation Has on The Housing Market

Areas of the country with the lowest impacts from the current inflation. There are many factors to consider if you plan to relocate. When researching where to live, you will want to weigh the costs of living, average household income, housing costs, and state tax threshold. With the cost of every product increasing, many Americans are relocating to “cheaper states”. Many housing experts list the top five cheapest states to live in as Mississippi, Oklahoma, Arkansas, and Missouri (currently Gustan Cho Associates are licensed to lend in all of these states). All costs of housing, groceries, and transportation are factored into this list of “cheaper states”.

How Inflation Is Affecting The Housing Market in Part Due To Skyrocketing Gas Prices

Transportation costs have skyrocketed across the nation as the cost of oil has gone through the roof. All of these factors add up to your total monthly budget.

Why It Mortgage Brokers Have More Options at Low Rates

As Gustan Cho Associates expand our coverage in more and more states, we have simplified the application process with our team. Our goal is to be licensed in 48 states by the end of the calendar year. This will allow us to help more Americans purchase or refinance a home. With technology rapidly growing in the mortgage industry, applying for a home loan is easier than ever. First, you can reach out directly to Mike Gracz on (800) 900-8569 for a one-on-one mortgage consultation. Mike will walk you through your qualifications and answer any mortgage questions you may have. We specialize in FHA, Conventional, VA, and USDA mortgage loans.

Non-QM Mortgage Options During Period of High Inflation and Low Rates

But what you may not know is, that we also have a full line of alternative income mortgage lending. We have access to many NON-QM mortgage programs including “lite” documentation, “no” documentation, and bank statement mortgage lending. We truly are a one-stop-shop for your mortgage needs and have access to more programs than most banks. After you go over your basic qualifications, Mike will pair you with a licensed loan officer in your state.

How Inflation Is Affecting The Housing Market When Applying For a Mortgage

You will fill out an online application and upload your required qualifying documentation. From there, your highly skilled loan officer at Gustan Cho Associates will analyze your credit report and calculate your income and available assets. You will then be issued a pre-approval letter or a customized financial plan to qualify as soon as possible. Our team is highly skilled in unique mortgage scenarios and has been able to assist many clients who thought they may not qualify. Even if you have been turned down by a bank or lending institution, we strongly encourage you to reach out to our team.

Housing and Mortgage Market Forecast in 2022

Wow, many experts believe we are in for some dark financial times; this is still a great time to purchase a home. As the cost of rent is going to continue to skyrocket, locking yourself into a long 30-year fixed mortgage can really help you create a steady monthly budget. Unfortunately, it looks like the buying power of the US dollar is going to continue to erode.

The federal reserve is currently trying to instigate a recession to calm the economy down. Many Americans feel this is the worst economic state they have felt in their lifetime. As somebody in their mid-30s, I can definitely agree with that.

Wow, I was going through college during the 2008 housing crash, I feel like we finally rebounded and now we are right back into hard financial times. Our team is available to help you find the home loan that will work best for you and your family. We strive to make ourselves available in the evenings and outside of regular business hours. So even if you have a question on the weekend, we strongly encourage you to reach out to our team.