INFLATION & THE HOUSING MARKET 

The monetary policy committee of the Federal Reserve voted last week to raise the Federal Funds Rate (the rate at which commercial banks borrow and lend their excess reserves to each other overnight.) target rate by 75 basis points to a range of 3% and 3.25%. This increase is the fifth in a series of rate increases since March as part of the Federal Reserve’s effort to bring the escalating inflation under control.

Job gains have been steady in recent months yet inflation, supply chain imbalances, higher prices for food and energy, as well as broader price pressures continue to pressure the economic recovery according to the Federal Reserve Board of Governors.

The Federal Reserve says it is prepared to re-adjust its position on monetary policy “as appropriate” if additional risks appear that could inhibit achievement of price stability and curbing inflation.

In the most recent National Housing Market Update webinar, Ali Wolf, Chief Economist for Zonda the housing market research firm, said the 75-basis point hike was “well-communicated” and was part of the Federal Reserve’s effort to “not shock the system.”

Doug Duncan, Fannie Mae Senior Vice President and Chief Economist stated, "In our view, the recent interest rate surge is due to the market's recognition of two critical factors: That inflation is indeed not transitory, and that, to tame it, the Federal Reserve will need to be resolute, even at the risk of possible recession."

This begs the question: What does this mean for the housing market in the remainder of 2022 and 2023 for the DFW area? According to a September 23, 2022 report by Marco Santorelli, founder of Norada Real Estate Investments, "The Texas housing market is expected to grow in 2023." Statistics show that Texas has had some of the strongest and most consistent housing appreciation rates in the country over the past decade. For example, Texas housing prices have risen 99.56 percent which equates to an average annual home appreciation rate of 7.15 percent per year over the past decade, according to the data collected by NeighborhoodScout. If you are a house buyer or real estate investor, Texas has been one of the finest long-term real estate investments in the United States over this period.

The next question is: But what about the climbing interest rates? Again, according to economists, the mortgage interest rates will likely continue to climb as inflation rises and the Federal Reserve continues its policy of increasing the Federal Funds Rate which has a direct correlation to interest rates. Also, it is unlikely that the interest rates will drop as quickly as they have risen so the bottom line seems to be that higher interest rates are here for at least the next 18 to 24 months. The old adage applies to this situation which says: “Marry the house, but date the mortgage.” Choose the house but realize that when interest rates eventually drop 1 to 1-1/2 points you can refinance your home.

Looking to buy – it’s still a seller’s market but inventory is increasing slightly providing better opportunities for the buyer that is ready and knows what they want. Remember, it is crucial that you work with your lender to be pre-approved for a loan and then work with a Realtor, like the Geni Manning Team, to find a home that meets your needs and pocketbook. Still uncertain? Read another of our blogs Why Waiting to Buy or Sell Can Be More Costly Than You Think.

For more information or to discuss your plans in real estate with a member of the Geni Manning Team just complete the information below and we will get back to you right away.