How Inflation Affects Mortgage Rates

When you read about the housing market in the news, you might see something about a recent decision made by the Federal Reserve (the Fed).

But how does this decision affect you and your plans to buy a home? Here’s what you need to know.

The Fed is trying hard to reduce inflation. And even though there’s been 12 straight months where inflation has cooled (see graph below), the most recent data shows it’s still higher than the Fed’s target of 2%: 

While you may have been hoping the Fed would stop their hikes since they’re making progress on their goal of bringing down inflation, they don’t want to stop too soon, and risk inflation climbing back up as a result. Because of this, the Fed decided to increase the Federal Funds Rate again last week. As Jerome Powell, Chairman of the Fed, says:

“We remain committed to bringing inflation back to our 2 percent goal and to keeping longer-term inflation expectations well anchored.”

Greg McBride, Senior VP, and Chief Financial Analyst at Bankrate, explains how high inflation and a strong economy play into the Fed’s recent decision:

“Inflation remains stubbornly high. The economy has been remarkably resilient, the labor market is still robust, but that may be contributing to the stubbornly high inflation. So, Fed has to pump the brakes a bit more.”

Even though a Federal Fund Rate hike by the Fed doesn’t directly dictate what happens with mortgage rates, it does have an impact. As a recent article from Fortune says:

“The federal funds rate is an interest rate that banks charge other banks when they lend one another money . . . When inflation is running high, the Fed will increase rates to increase the cost of borrowing and slow down the economy. When it’s too low, they’ll lower rates to stimulate the economy and get things moving again.”

How All of This Affects You 

In the simplest sense, when inflation is high, mortgage rates are also high. But, if the Fed succeeds in bringing down inflation, it could ultimately lead to lower mortgage rates, making it more affordable for you to buy a home.

This graph helps illustrate that point by showing that when inflation decreases, mortgage rates typically go down, too (see graph below): 

As the data above shows, inflation (shown in the blue trend line) is slowly coming down and, based on historical trends, mortgage rates (shown in the green trend line) are likely to follow. McBride says this about the future of mortgage rates:

“With the backdrop of easing inflation pressures, we should see more consistent declines in mortgage rates as the year progresses, particularly if the economy and labor market slow noticeably.”

Bottom Line

What happens to mortgage rates depends on inflation. If inflation cools down, mortgage rates should go down too. Count on a real estate professional you can trust for expert advice on housing market changes and what they mean for you.

Read more on Keeping Current Matters.

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• 5 Fancy Home Features That Are Super Cool, but Make a Home Harder to Sell

• Owning Your Home Helps You Build Wealth

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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The Complete Guide To Designing and Renovating Your Kitchen

Designing and renovating your kitchen can be a daunting task, especially if it's your first time.

A kitchen is the heart of a home, and its design speaks volumes about your personality and lifestyle. A well-designed kitchen can significantly boost the value of your home. It can also make cooking and entertaining an enjoyable experience for you and your guests. However, before you embark on your kitchen renovation project, there are some important factors you need to keep in mind. In this blog post, we'll give you a complete guide to designing and renovating your kitchen with tips for homeowners.

Plan Your Kitchen Renovation Project
The first step in designing and renovating your kitchen is to plan your project. This includes setting your budget, deciding on the design style you want, the appliances that will fit your lifestyle, and the materials you will need. It's important to prioritize your renovation needs so you can allocate your budget accordingly. A contractor or kitchen designer can help you plan your project and offer valuable advice.

Determine the Kitchen Layout
The layout and flow of your kitchen are crucial factors to consider when designing and renovating. You want to optimize your kitchen space to create a functional and efficient workflow. The three most popular kitchen layouts are U-shaped, L-shaped, and galley. Your choice will depend on your space availability and your preferred style.

Choose Your Kitchen Cabinetry
Cabinets play a significant role in the design and functionality of your kitchen. Consider the materials, style, and color you want for your cabinets. You can choose custom-made cabinets or semi-custom ones. Custom-made cabinetry allows you to have full control over the design, size, and materials. Semi-custom options offer more design options at a lower cost.

Select Kitchen Appliances
Kitchen appliances also play a significant role in the functionality of your kitchen. You want to choose appliances that fit your lifestyle and cooking preferences. Popular appliance brands include GE, LG, Bosch, Samsung, and KitchenAid. You can go for energy-efficient appliances to save on your energy bills.

Work With a Reputable Contractor
A contractor plays a vital role in designing and renovating your kitchen. You want to work with a reputable one who has years of experience and a good track record. Consider asking for references and viewing their portfolio before hiring them. A good contractor will help you stay within budget, ensure quality workmanship, and handle any unexpected issues that may arise.

In conclusion, designing and renovating your kitchen is a significant investment that requires careful planning and consideration. By following the tips outlined in this guide, you can ensure that your kitchen renovation project is a success. Remember to focus on functionality, design, and efficiency when making decisions about the layout, cabinets, and appliances. Additionally, work with a reputable contractor to ensure you get quality workmanship within your budget. Good luck with your kitchen renovation project!

Get more tips on RISMedia.

Related Links

• A boom(er) market on the horizon

• 5 Fancy Home Features That Are Super Cool, but Make a Home Harder to Sell

• Owning Your Home Helps You Build Wealth

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Is the Housing Market Heading Toward a Soft Landing? Here’s What the Latest Statistics Say

Talk of a soft landing seems to be everywhere of late, as pundits ponder whether the Fed’s rate hikes can strike that tricky balance between cooling inflation without plunging the economy into a recession.

While it’s still too soon to say what will happen, many may also wonder: Does this hoped-for soft landing apply to America’s housing market, too?

So far at least, the U.S. housing market has been having a crummy summer that feels anything but soft for both homebuyers and sellers.

In July, homeowners mostly opted to sit tight and ride out the tough market conditions rather than list their properties for sale. That meant house hunters had slimmer pickings to choose from—40,000 fewer homes across the U.S., according to the latest monthly data from Realtor.com®.

“Sellers are still on the sidelines, locked in to lower interest rates with low expectations of rates improving significantly over the next year,” Realtor.com Chief Economist Danielle Hale notes in her report.

It all adds up to a housing market stuck in limbo, with would-be buyers and sellers watching and waiting, hoping things change in their favor.

Inside the housing market’s summer slump

For now, homeowners seem resigned to waiting for market conditions to change.

In July, according to the report, the number of newly listed homes entering the market was a whopping 20.8% lower than last year. For buyers, that meant that the total number of homes for sale (both new listings and old) was 6.4% lower than last year.

Among the 50 biggest metro areas in the U.S., the inventory of homes for sale is now just half what it was in the years before the COVID-19 pandemic.

Meanwhile, it’s safe to say that no one is happy with home prices. Listing prices, or what sellers hope to get, are ticking lower—down 0.9% in July compared with last year—to $440,000. And the median sale price, or what’s agreed to in contracts, was also down, by 1.6% compared with last year.

For buyers, “Any relief is welcome, but let’s put it in context. This is a small bit of relief, not a huge discount,” says Hale.

Plus, she warns, “We don’t know how long it will last.”

Buyers are also contending with mortgage rates that have stayed higher for longer than most people expected or wanted. This has ratcheted up the cost of financing 80% of the typical home by 15.9% compared with July of last year, which amounts to an extra $317 per month.

Why the pace of home sales is slowing

Fewer homes at higher costs have understandably slowed the market. The typical home spent 45 days on the market this July, which is 12 days longer than the same time last year.

For homebuyers accustomed to seeing homes fly off the market in a matter of hours, this longer pace means they have time to let properties sit a while before deciding to pull the trigger.

However, from a big-picture perspective, homes are still spending 12 fewer days on the market than they did in the pre-pandemic era, suggesting everyone is having to move relatively quickly compared with in the past.

So as summer wanes, buyers might face a more existential question: Should I keep trying?

“This is not the time to hurry up and buy,” says Hale, but she definitely does not think buyers should give up entirely.

“Can you find what you need from the housing market and can you afford it? If you can, then it makes sense to keep looking,” she says. “Don’t try to time macro factors. If you’re always waiting for the right moment, you could end up waiting forever.”

Get more on Realtor.com

Related Links

• A boom(er) market on the horizon

• 5 Fancy Home Features That Are Super Cool, but Make a Home Harder to Sell

• Owning Your Home Helps You Build Wealth

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Greater Denver Area Real Estate Market Report from July 2023

As summer vacations end and interest rates continue to climb, the Denver market remains unpredictable, according to the Denver Metro Association of Realtor’s Market Trends Committee.

Would-be buyers and sellers are weighing the "golden handcuff" dilemma. They love their historically low interest rates on their home, but no longer love their home. To give some context, 91.8 percent of mortgages in the U.S. are under six per-cent, while 82.4 percent are under five percent. To showcase this current issue, new listings were down 15.33 percent month over month and down 24.76 from this time last year. Conversely, active listings at month-end were up 3.76 percent month over month, showcasing a slight increase in inventory.

Inventory aside, many would-be buyers are in a position where they need to sell their home first before purchasing a new one. As a result, contingent sales, which allow an individual to purchase their next home with the caveat that the purchase is contingent upon the sale of their current home, are on the rise. In a landscape with market uncertainty, contingencies allow buyers some confidence purchasing a new home. Saying that, sellers are more willing to accept contingent offers today as they realize the market is shifting, and ultimately, want to sell their homes.

It is important to note that we still have a lack of inventory, and while demand is slowing, we are still in a seller's market for many of the price points we cover, with the exception being $299,999 and below and $1.5 million to $2 million+. I think it's a testament to sellers willing to bend since pending sales were down slightly at 1.73 percent from last month and 2.58 year over year. Closed sales were down 16.34 percent month over month while they were down 18.47 percent year over year.

Buyers who do not need to sell to purchase their next home are looking at 2-1, or other temporary buy-down programs, to help alleviate interest rate woes. These loan programs are attractive because they reduce the current interest rate for two years before the original rate at application applies. The general prediction is that interest rates will go down within the next year, allowing these borrowers to refinance to a lower rate which helps buyers purchase now as opposed to sitting on the sidelines.

Regardless of loan programs and willingness to negotiate from sellers, buyer activity continues to slow as rates increase.

They are rate and budget conscious, looking for a good deal. Buyers are more confident offering under the list price and asking for seller concessions to help buy down their interest rate even for new homes hitting the market. Consequently, seller concessions increased from 29.2 percent last June to 48 percent this June, averaging $7,295. This may be the best time to buy in recent history as buyers can finally negotiate after enduring years of a strong seller's market. In fact, the close-price-to-list-price ratio dropped below 100 percent in recent history to 99.88 percent market wide, 99.93 for detached and 99.76 for attached. The biggest tip for those shopping for homes? Look at homes that have been on the market for 30 to 60+ days. These sellers want to sell and have very likely dropped the list price a few times.

There may be some light at the end of the tunnel for those of us who thrive on a predictable market. Historically, July and August are slower months with a rebound occurring in September. Since the spring market was a bit of a bust, are we in for some delayed gratification with a stronger fall?

Learn more about the market from the Denver Metro Association of Realtors.

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Thank you to our partners at the Denver Metro Association of Realtors for compiling this information.

If there is a home that you would like more information about, if you are considering selling a property, or if you have questions about the housing market in your neighborhood, please reach out. We’re here to help.

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Just Listed: A Luxurious Townhome in Castle Rock with Modern Amenities!

Welcome to your new home!

This three bedroom, three bathroom townhome boasts vaulted ceilings, an open concept living area, granite countertops, and loads of natural light. The kitchen is fully equipped including a double oven, range hood, dishwasher, upgraded farmhouse sink, and large island. The kitchen is open to the family room - great for entertaining! The main floor also includes laundry and a 1/2 bathroom. The second level includes three spacious bedrooms and two bathrooms. The primary suite includes a 3/4 bath with double vanity, glass shower and a large walk-in closet. The full basement is ready to be finished, complete with a stubbed in bathroom. This beautiful spot in Castle Rock is near great trails, parks and shopping. The HOA includes access to the Ridgehouse pool, fitness center and meeting space. The HOA will be completing the backyard landscaping as well as installing a fence. The HOA fees also cover exterior maintenance - roof, gutters, siding.

Listed by Lisa Peters for West + Main Homes. Please contact Lisa for current pricing + availability.

 

Have questions?
West + Main Homes
(405) 652-6635
hello@westandmain.com

Presented by:
Lisa Peters
303-895-1834
lisa.peters@westandmain.com

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