What you can do when prices rise – click Telegram

Written by Suzanne De Vito | Bankrate.com

Inflation is not done with the American public.

After a modest increase of 0.1% in August, the consumer price index increased by 0.4% in September, which led to large increases in the cost of food, health care and housing.

While housing overall rose 0.7 percent, both the rent index and the rent-equivalent index for homeowners rose 0.8 percent in September. The latest is the largest monthly increase for this index since June 1990.

The Federal Reserve responded, as it has done all year, with another interest rate hike. That means higher rates on many types of mortgages and — for home buyers in general — continued elevated home prices in the coming months.

To bring inflation back down to Earth, the Federal Reserve has steadily raised rates — five times so far in 2022, with the most recent increase on September 22. These actions have had an indirect effect on mortgage rates, with the average 30-year fixed rate recently exceeding 7 percent. As of July, average monthly mortgage payments are up 50 percent from last year, from $1,240 (2021) to $1,861 (2022), according to the National Association of Realtors’ latest “Housing Affordability Index.”

What is happening now in the housing market

According to CoreLogic, home prices rose 13.5 percent year-over-year in August. While that represents a slowdown, it’s still high by historical standards, and inflation isn’t helping. Both buyers and sellers are less optimistic about their prospects, according to the latest Fannie Mae index, with the trend steady.

“HPSI [Home Purchase Sentiment Index] fell this month to the lowest level since October 2011,” Doug Duncan, Fannie Mae’s senior vice president and chief economist, said in a statement. of consumers believe that home prices will fall, not rise, next year – a shift in polling sentiment that previously occurred only in 2011 and at the start of the pandemic in 2020.

“What’s more, 75 percent of consumers still think it’s a bad time to buy a home, with most citing high home prices and unfavorable economic and mortgage rates as the main reasons.”

Should we expect a decrease in inflation?

With inflation still weighing on the economy and housing market, should you buy a home now? What about selling the house now?

If you can’t make the numbers work, you might want to wait until it’s over instead of buying a home today to beat rising prices and rates, especially if you’re a first-time buyer. Even though you’re putting off building equity, you may find that you’re in a better position to buy in the future when the market cools and your income potentially has room to grow.

“Even if inflation is steadily declining, that does not mean prices are falling; it just means prices aren’t rising as fast,” says Greg McBride, chief financial analyst at Bankrate. “For homebuyers, a more modest rate of appreciation or even a period of stagnant home prices could allow for further income growth. Instead of overstretching yourself now, you can buy a little more comfortably in a couple of years when your income growth outpaces housing price growth. But there are no guarantees, and the rent has definitely increased during this time.”

However, your life circumstances may require you to buy a home now, and that’s as valid a reason as any. Since you are buying at or near the peak of the market, be prepared to stay home for a while if you want to come out ahead when you sell.

For sellers, the situation is turning around. Depending on where you live, you may find fewer takers or have to lower the price. Let’s not forget what’s happening on the other side of the deal: When you’re looking to buy your next home, you’ll be fighting for a limited number of properties available – and now you’ll probably get a new mortgage at a higher rate to boot.

If you’re in the mood to buy now, you can try stretching your dollars:

— Placement of down payment savings in a high-yield account. One benefit of inflation and the Fed’s response: higher interest rates on savings accounts. If you haven’t already, put your down payments into a high-yielding account. Just make sure the account allows you to easily access your money when it’s time to close — some online savings accounts take three days to deliver your withdrawal funds.

— Consider a mortgage lender with low or no fees. Although it may be more convenient to get a mortgage from your bank, banks usually charge an origination fee, often 1 percent of the amount you borrow. Many non-bank and online lenders don’t, so if you find a no-fee lender with attractive rates, you’ll have more money in your pocket.

— Fixing the mortgage rate. When you find a lender and apply for a loan, ask about fixing your rate. Now is not the time to take a risk if your monthly mortgage payment has suddenly skyrocketed in price right before you are about to close.