With inflation top of mind for everyone, Doug Greene of Signature Properties outlines five ways it can impact your plans to buy or sell real estate in 2022.
Unless you’ve been living under a rock these past couple of years, you are probably seeing and feeling the real impacts of inflation. A staggering 8.6% change in consumer prices over the last 12 months has rocked the economy and left many asking: “Where do we go from here?” or “How will this impact the value of my home?”.
In just a short time, higher prices have created many extreme reactions by consumers. People are traveling less with the increase in gas prices and eating differently since their grocery bill is mounting. Some are even calling their broker and asking “Should I sell my house fast?”…thinking maybe a quick sale will protect their interest and equity. So let’s take a step back and dive into five real impacts that inflation can have on your real estate, your investment property or your plans to purchase or sell a house in 2022.
It’s no surprise here that interest rates are on the rise in order to mitigate the unchecked inflation numbers. For the prospective homebuyer, this means that your monthly interest on your mortgage is going to go up! Talk to your loan representative to understand by how much so that you can work backwards and recalibrate your budget. Yes, it’s not a good feeling to know that you can now afford less. However, if you plan to own this property for a long time, you may have another chance to refinance at a lower interest rate in the future.
Real estate has been a hot commodity these past few years. Ask any agent and they can elaborate on the fact that inventory of available properties has been at record lows. With inflation creeping up and interest rates deterring prospective buyers, this might bode well for rebalancing the supply of on-market homes. That’s positive news for buyers and it might mean that sellers need to give up some of their competitive advantage in the market. Regardless of what side of the market you are on, if you’re wondering what’s available or how quickly your house might sell then you should be reaching out to a local and trusted agent that can get your results and answers.
Have you been looking for a home for over a year now? Do you doubt that you’ll ever find what you want on the MLS? Perhaps you’ve considered building a new home – one that meets your needs and specifications exactly! What you might have missed is the fact that prices of lumber, concrete and other building materials have doubled and tripled in recent years. Inflation has really hit this segment hard and deterred many from embarking on a new build. Be sure to look into this before you decide to build something new.
When it comes to real estate as an investment, inflation might actually be a tailwind for you. If you own rental property, inflation has and will continue to push rents upward. With this, your cash flow is going to increase and you’ll continue to benefit from other factors such as appreciation, principal pay-down and tax benefits.
Great news! If you’ve been a property owner, whether as a primary resident or investor, for any short amount of time recently then you may have built up some significant equity. Inflation has increased asset prices across the board and real estate is no exception. Many homeowners have taken advantage of this by refinancing, selling or even using a HELOC to borrow out that money.
These are just five of the major implications inflation is having on real estate. As we continue through 2022, keep track of the data and use these details to help you navigate your real estate decisions.