How does inflation impact the real estate market?
We’ve been hearing a lot of questions about inflation lately, specifically about how it affects the real estate market. Will home prices drop? Is the market going to crash? Today we’re bringing you the facts about inflation, how it affects real estate, and how it doesn’t.
Inflation is the rate at which the cost of goods increases over time. Experts like to see 2% inflation each year based on the consumer price index (CPI). In the same way that the price of other goods appreciates over time, real estate values go up as well. On average, home values rise 3% to 4% year over year, which tells us right away that real estate tends to outpace inflation.
In 2022, the CPI increased 6.8% over last year, which is abnormally high. During that same time frame, housing values have increased by 16% in the Houston metro.
If you’re thinking about selling your home, know that prices will only continue to rise. This is still one of the best seller’s markets we’ve ever seen. However, inflation will affect other things like gas and groceries, so buyers will have to restructure their budgets, possibly reducing how much they can spend on a home.
“If you don’t need to move right now, this is probably not the market for you.”
If you’re looking to buy a home, this is a must-move market—you should only move if you really must. If you need to move, you can still take advantage of today’s low interest rates. Rates are on the rise, but you’d be buying in one of the fastest-growing housing markets we’ve ever seen.
Chances are that after you close the transaction in 30 to 45 days, your home will already be worth more than what you bought it for. Keep in mind that it’s hard to say where home values will go, but that may not matter if you plan to stay in the home long term.
If you don’t need to move right now, this is probably not the market for you. It may be better to keep renting or stay in your current home. That way, when inflation normalizes, you can be ready to attack the market.
When that time comes, or if you’re ready to buy a home now, I’ll be right here, waiting to help you. Don’t hesitate to give me a call or send me an email if you have any questions or need assistance. Hope to hear from you soon!