Turmoil in the economy. Interest rates are on the rise. Inflation is at the door. In other words, all the macroeconomic data seems to indicate that it will be a lot more expensive to buy a home in 2022. But, you know what they say — “you ain’t seen nothing yet.”
This article projects how much more expensive home-buying could be in 2022.
Why Should The Inflation Rates Make It Costlier To Buy A Home In 2022?
Theoretically, inflation is the rate at which the price level of goods and services rises. In other words, it is the rate at which money loses its purchasing power. But in reality, it is a lot more than that.
Inflation impacts all aspects of life, from your day-to-day expenses to significant purchases. If you are planning to buy a house in 2022, then there are some things that you need to know about how inflation will affect it.
The Inflation Rate and the Housing Market
One of the most critical factors affecting housing prices is inflation. If inflation rates increase by more than 2% annually over time (which they usually do), home prices tend to rise.
When people’s income increases, they usually spend more money on housing costs such as mortgage payments, utilities, property taxes, etc. Therefore, if you plan to buy a house in 2022, you should keep an eye out for inflation rates to take advantage of them before they become too high.
What Is The Current Situation?
The current situation is that inflation has been increasing since 2016. Inflation has continued to rise since then, and it is expected to continue growing at least through 2022. This trend is likely to continue for at least the next decade because of economic factors such as labor shortages and trade wars.
How Much Do Experts Expect Interest Rates To Rise?
Interest rates have been rising slowly, but the rate of future increases remains uncertain. As a result, experts project different inflation rates over the next few years.
The Fed’s target inflation rate is 2%, but there’s no guarantee that the economy will hit that figure exactly.¹ And while rising interest rates can push up prices, they don’t always do so. For example, when mortgage rates dropped during the financial crisis, home prices fell instead of rising.
Inflation rates are notoriously difficult to predict because they’re affected by so many factors. The housing market is particularly unpredictable because it depends on consumer confidence and spending, which can change quickly based on unemployment and wages.
Will It Be Impossible to Buy in 2022 With the Rising Inflation Rate?
Buying a home is already a significant financial decision. But if the U.S. inflation rate continues to rise over the next few years, it could make it even more expensive for budding homebuyers to buy their first home in 2022.
According to Zillow’s latest Home Price Expectations Survey, real estate experts expect housing prices in the U.S. to go up by 13.6% in 2022.²
“About Mountain West Financial and the CalPATH Home Loan Program
Mountain West Financial is the exclusive lender offering CalPATH, the #1 home loan program for Teachers, Police Officers, Firefighters, and other public employees who serve our local California communities.
You may contact our CalPATH Hotline @ 800-310-7577, seven days a week from (8:30 am to 8:00 pm) or visit our website @ mwfdirect.com. A CalPATH advisor will be standing by to answer (any & all) questions you may have about the home buying or refinance process.
We look forward to working with you soon!
CalPATH Division Manager
Links to Sources Used:
- The Fed’s Inflation Target: Why 2 Percent? https://www.stlouisfed.org/open-vault/2019/january/fed-inflation-target-2-percent
- Home prices are set to soar in 2022, predicts zillow https://fortune.com/2021/12/20/home-prices-set-to-soar-2022-predicts-zillow/