The Impact Of Inflation On Housing

The rapid jump in inflation hasn’t been experienced by many people living today. We have to go back to the 1970s and 1980s to find a similar time in our economy. This is illustrated by Reports on Housing October letter that shows the rapid jump in key indicators in short time periods that then enjoyed years of much slower appreciation.

Using gasoline prices, Mr. Thomas points out the a gallon cost 99₵ in 1989. This was a jump from an average of 33₵/gallon in 1973 before the Arab Oil Embargo. By 2000, the price had crept up to $1.59. It doubled in a decade, then stayed relatively stable until 2021 when prices rose to $4.60 at year’s end. We all know where prices have gone in 2022.

Mortgage rates enjoyed an almost steady decline for 30 years following their descent from double digits in 1990. 2022 has seen a 3.22% Freddie Mac average in January jump through significant heights to a 6.82%. This, coupled with the rapid home price increases fueled by low interest rates and low housing supply in 2020 through early 2022 have led to today’s stall in home sales. More than 1/3 of the mortgages are now below 4%, leading many of these homeowners to stay in place rather than venture into a higher priced home with a higher priced mortgage. 

This said, it is great time to sell if circumstances are right for you. Life changes through retirement, empty nesting, or other situations may make selling a larger home now a right move. The home prices are lower than the start of the year but still dramatically higher than just a couple of years ago. Higher in most neighborhoods than any other 2 year stretch in our history.

Please give us a call at Premier Funding Network to answer any of your mortgage questions, 714-283-9900.