Home Buyers: Don’t Let Inflation Stop You
The housing market has been full of twists and turns. The news is currently raving about home prices, rising consumer costs, and supply chain constraints. Another concern is inflation, the idea that prices will rise due to the decline of purchasing power. While this is a valid concern, it should not stop you from buying a home. The housing market changes all of the time, and the benefits of purchasing and living in your own home are plentiful.
Mortgage Rates Are Increasing, But Are Still Great
Mortgage rates are constantly changing from month to month because of several factors. Sam Khater, Chief Economist at Freddie Mac, gave some context to today’s rates. He mentions in a press release that mortgage rates have risen across “all types of loans.” This marks the 10 year US Treasury yield being its highest since June. Khater talks about this treasury yield because there is a known correlation between the mortgage rate and the treasury rate. The 30-year mortgage rate has worked in unison with the 10-year treasury rate. When one goes up, the other does too. When the treasury rate had a slight jump, the mortgage rate did as well.
Khater also commented on other factors that contributed to the rate increase. He mentioned that the Federal Reserve communicating that it will taper its support of markets also contributed to the rising rates. The broadening of inflation and new energy supply shortages contribute to labor and material shortages. All of this could affect the market to raise or lower the rate. Khater expects that mortgage rates will continue to rise slightly. This will cause the cost of financing a home to increase for home buyers over the short term.
It’s important to know that this is still not a reason to fret. Mortgage rates are still hovering near historic lows. Inflation will not make homes impossible to buy. The historic low mortgage rates are cause for optimism, as buyers today will still be saving more than people years ago.
Federal Reserve Hikes
Alongside rising mortgage rates, Goldman Sachs now expects four federal reserve hikes to happen in 2022. This would raise interest rates in the United States, but it would not be the worst thing to happen. Inflation influences the rate hikes, but these hikes are projected to be modest in nature. Goldman’s forecast predicts that the rates will be shortly above the market pricing for 2022. The hikes will start to become more effective as the year goes on, so locking in a mortgage rate now could save you money in the future.
Home Security
Buying a home is also a great option for security. Housing prices will slowly rise, but so will other prices as well. Markets can be unpredictable, and the price of food, utilities, and other resources may increase. This is why a home is a great option. Owning a home gives you shelter and wealth for the foreseeable future. Home prices are expected to continue appreciating. A survey from late 2021 showed just how fruitful it can be to own a home. When looking at the data, we see the potential wealth from buying a home. If a home was $350,00 in 2021, a homeowner could increase their net worth by over $82,000 in 5 years.
Fannie Mae also reported that homes are a safe, high potential investment to make. Materially, every payment you make on your home increases your net worth and gives you property value. The potential growth for years to come makes home owning one of the best options that you can take to accrue wealth. A fixed mortgage rate locks in a price that you will pay in the future. This is not the same for renting, where your rent can increase and decrease as the years go on. Locking in a mortgage rate is a stable option when considering the long term. Inflation may raise prices, but it won’t stop you from locking in a solid rate that can give financial security.
Immaterial Benefits To Owning A Home
While the financial benefits of owning a home are significant and important, a house is more than an investment. Owning a house is also about having a place that you can call your own. It is about having a place where you can build lifelong memories with those you love. It is about security. It is about purpose. It is about so much more than mere dollars and cents.
Your personal American dream can be pivotal to the overall life that you live. Unison did a report on the state of the American homeowner in 2021. They reported that 91% of people felt more secure and stable and 70% of people felt attached to their home. The survey also found that 51% of people thought their home was a key part of their life. Owning a home alongside other homeowners fostered a sense of belonging and safety. These are core values that are not necessarily tangible but are still important to experience. Purchasing a home is more than just gathering wealth, it’s establishing stability and community.
Final Thoughts
Inflation is a reality that will most likely affect us as we navigate 2022, but it is not a reason to give up on your dream home. The slight rise in cost is bound to happen as mortgage rates rise and home prices rise as well. The best way to prepare for the future and shield back against inflation is through locking in a good mortgage rate. Streamline Realty is here to help you lock in a rate and get settled in a secure new home. The benefits of owning a home outweigh any slight increase in costs that could happen. If you are interested in owning a home, please contact us! Our team is ready to help you find a new home and get you secure.
