Inflation and the housing market: Decoding the latest numbers
The September 2023 Consumer Price Index (CPI) report brings both good news and challenges for the housing market. While overall inflation has slowed from its peak last summer, housing costs continue to be a significant factor. In this blog post, we’ll delve into the latest data and offer advice for both buyers and sellers looking to make informed decisions in the current market.
Inflation and the Housing Market
The latest CPI figures reveal a 0.4 percent increase, a slight decrease from the previous month. However, housing costs remain a major contributor, accounting for over half of September’s increase. With shelter costs rising 7.2 percent over the past year, it’s clear that this is an ongoing concern.
For Buyers: Assessing the Situation
Low inventory levels persist, presenting a challenge for potential buyers nationwide. With only a 3.3-month supply of housing inventory in August, it’s understandable that some may hesitate. If you’re a first-time homebuyer, it may be worth considering waiting for a more favorable market, especially if your income has room to grow.
Greg McBride, Chief Financial Analyst at Bankrate, advises, “Even when inflation comes down, it doesn’t mean prices will fall, but rather that they won’t rise as fast.” This suggests that patience may pay off in the long run.
For Sellers: Seizing Opportunities
The ongoing housing shortage may provide an advantage for sellers looking to get a better price for their homes. However, it’s important to remember that if you’re planning to buy a new home, you’ll face the same circumstances and potentially high mortgage rates as other buyers.
Location is a crucial factor. Median home prices vary widely across regions, so understanding your local market is essential. According to Knock’s 2023 Buyer-Seller Market Index, the West and Southwest favor buyers, while the East continues to favor sellers.
Tips for Homebuyers in a High-Price Market
If you’re determined to buy in the current market, consider these tips to make the most of your budget:
- High-Yield Savings Account: Stash your down payment savings in a high-yield account to benefit from higher interest rates. Ensure easy access to your funds when it’s time for closing.
- Choose a Low or No-Fee Lender: Many non-bank and online lenders offer mortgages without origination fees, helping you keep more money in your pocket.
- Lock in Your Mortgage Rate: Protect yourself from potential rate hikes by discussing the option to lock in your rate with your lender.
Conclusion
Inflation’s impact on the housing market presents both challenges and opportunities for buyers and sellers alike. By staying informed and considering the unique circumstances of your situation, you can make the right decisions in this evolving market. Remember, patience and strategic planning can be powerful tools in navigating today’s real estate landscape.