Although the pandemic has had harsh outcomes for many industries, the housing sector has flourished.

Indeed, the pandemic will not last forever, but its impact will have changed the way we live and work for the foreseeable future. The housing market has great tailwinds with millennial demand, the migration from big cities to the suburbs, and homes becoming offices. It is anticipated that home values will continue to rise. This unexpected perfect storm has created a boom across the mortgage industry. Home values have soared due to low inventory and the onset of the lowest interest rates in U.S. history.

What could change this forecast? Inflation, which is the rate at which a currency value falls while at the same time, the cost of goods and services rise.

Inflation expectations have been on the rise and are currently at the highest level since May 2019. If inflation rises faster than the Fed expects (right now, they see inflation tame until 2024) then they will be forced to raise rates. Inflation is the arch-enemy of interest rates. If inflation rises, rates will rise.

A window of opportunity: If inflation does indeed rise, would-be homeowners would want to take advantage of buying a house now, rather than wait. Why? In a higher inflationary environment, wages and rent go up, so renters pay their escalating rent with higher wages. If you purchase and lock in a mortgage today, you can pay down your mortgage with ever-increasing wages. Finally, in an inflationary environment, home prices increase even further.

Call to discuss: We can help provide advice and programs to benefit you whether purchasing or refinancing.

Source: Mortgage Market Guide