World events and government spending has led to soaring inflation. The Federal Reserve has only one tool in its arsenal to curb and reduce this trend – raising interest rates. While contemporary home buyers are accustomed to interest rates in the 2-4%, older homeowners remember being excited to get a mortgage rate as low as 8%. As we face the reality of home mortgage rates reapproaching those levels, potential home buyers may be asking if they should still try to buy a home.
One of the first things to consider is affordability. A higher interest rate will impact the amount of loan each buyer can qualify for, potentially reducing their spending power. Yet, at the same time, home prices are also beginning to soften, so it’s possible that this correction will reduce the possible impact from rising rates.
Secondly, home ownership has been a strong hedge against inflation historically. Buying a home locks in the cost of the largest budgetary portion of your expenses – your housing cost. As the cost of living continues to increase, rents will also rise, continuing to add pressure to an already strained household budget.
Finally, things change. Recessions and higher rate do not last, home prices eventually rise, and home mortgages can be refinanced. Most homeowners move every 5-7 years and so potential home buyers should plan for this timeframe when making decisions.
Is this still the right time to buy a home? Inflation and higher rates definitely have an effect, but it does not necessarily mean that one needs to hold off on a good home purchase.
If you would like to discuss current market conditions and strategies for your scenario, please reach out to Jackie Quigley and her team @ jackie(at)QuigleyTeamOH(dotted)com, to schedule an appointment.