Inflation in Today’s Real Estate World

by | May 8, 2022 | Saul's Insights | 0 comments

 

In a Fortune article, Shawn Tully speaks with Ed Pinto, Director of AEI’s Housing Center, about how housing demand may continue to run hot in the midst of high inflation and increasing mortgage rates.

Mortgage Interest Rates are still a bargain. Mortgages aren’t the fabulous bargain of a year ago, but they remain attractive compared with most periods, and especially in this time of rampant inflation.

It’s good for folks who own houses, it’s even good for people looking to buy now and can afford a home that’s 30% pricier than pre-pandemic.

The losers are the lower income families for whom the backlash from easy money is killing the American Dream.

The faster overall prices are rising (Inflation), the lower your inflation-adjusted mortgage payments will be in the future.

According to Ed Pinto, it will take another jump to the 6% to 7% range to greatly slow appreciation.

“Then, you’d see a significant drop in demand and increase in inventories,” he says. But prices wouldn’t go negative; they’d simply reset by rising in the mid-single digits.

According to Pinto, it would take a 10-year Treasury rate of 4.5% to 5.0% to get the 30-year number to the 6.5% that would slow the gains to one-third of their current pace. That’s as much as 75% higher than were the long bond stands today.

 

If real estate sales is your business, keep selling.

 

 

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