Should You Buy a Home with Inflation This High?

Vesna Marjanovic

07/28/22

While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still going up. You no doubt are feeling the pinch on your wallet at the gas pump or the grocery store, but that news may also leave you wondering: should I still buy a home right now?

Greg McBride, Chief Financial Analyst at Bankrateexplains how inflation is affecting the housing market:

Inflation will have a strong influence on where mortgage rates go in the months ahead. . . . Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.”

No one knows how long it’ll take to bring down inflation, and that means the future trajectory of mortgage rates is also unclear. While that uncertainty isn’t comfortable, here’s why both inflation and mortgage rates are important for you and your homeownership plans.

When you buy a home, the mortgage rate and the price of the home matter. Higher mortgage rates impact how much you’ll pay for your monthly mortgage payment – and that directly affects how much you can comfortably afford. And while there’s no denying it’s more expensive to buy and finance a home this year than it was last year, it doesn’t mean you should pause your search. Here’s why.

Homeownership Is Historically a Great Hedge Against Inflation

In an inflationary economy, prices rise across the board. Historically, homeownership on Martha's Vineyard is a great hedge against those rising costs because you can lock in what’s likely your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses. Not to mention, as home prices continue to appreciate, your home’s value will too. That’s why Mark Cussen, Financial Writer at Investopediasays: 

Real estate is one of the time-honored inflation hedges. It's a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”

Also, no one is calling for homes to lose value. As Selma Hepp, Deputy Chief Economist at CoreLogicsays:

“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”

In a nutshell, your home search doesn’t have to go on hold because of rising inflation or higher mortgage rates. There’s more to consider when it comes to why you want to buy a home. In addition to shielding yourself from the impact of inflation and growing your wealth through ongoing price appreciation, there are other reasons to buy a home right now, like addressing your changing needs and so much more.

Working with local banks on Martha's Vineyard

One of the perks of living in the Martha's Vineyard community is having smaller local banks you can partner with. On multiple occasions throughout the years, and more importantly, recently, after the interest rates went up, our clients have been very surprised to find out they are able to get a much better rate here than what they are being offered by the bigger banks or online lenders. 

Our clients love to work with people who know Martha's Vineyard and have relationships with Island attorneys. This can put them in a better position to resolve potential conflicts during the loan approval process.

If this is your preferred route, we compiled a list of local lenders should you choose to contact them. 

Bottom Line

Homeownership is one of the best decisions you can make in an inflationary economy. You get the benefit of the added security of owning your home at a time when experts are forecasting prices to continue to rise.

If you have any questions or concerns on this topic, CLICK HERE to schedule a Buyer or Seller consultation.

WORK WITH THE O'HANLON GROUP

As a team, we work in harmony for the benefit of our clients. We handle multiple transactions at once and are able to execute a complex marketing strategy by leveraging team resources. We can be in several physical locations at once to ensure showings are always possible for our buyers and sellers. Our clients benefit from the combined experience of our agents and administrative staff.

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