how does inflation affect housing prices

How Does Inflation Affect Housing Prices?

Inflation tends to increase housing prices. The Federal Reserve raises interest rates from time to time to bring inflation down. The Consumer Price Index, a tool to track inflation, jumped 0.4% in September 2022 after a modest increase of 0.1% in August.

As a result, mortgage rates have risen, with the average 30-year fixed rate surpassing 7%. If you’re looking to buy or refinance, Altitude Home Loans is the trusted Mortgage Broker in Tucson, AZ. Call (520) 500-1010 to learn about inflation and house prices from our experienced team.

In this article, we will answer the question, “how does inflation affect housing prices?”

Federal Reserve Rate Hikes Affect Mortgage Rates

Mortgage rate changes depend on many factors, including inflation, real estate markets, and economic growth. In September 2022, the Federal Reserve increased short-term rates by 75 points. The increased rate means credit cards, car loans, and adjustable-rate mortgages come with higher interest rates.

As inflation soars and the Federal Reserve responds by raising interest rates, borrowing becomes substantially more expensive for consumers. According to WalletHub, the average home loan of $402,600, with a 30-year fixed rate, would cost homebuyers $30,600 more in interest. 

Inflation Increases Cost of Homes

Rising interest rates have increased housing market prices. In January 2022, the 30-year mortgage rates averaged around 3.22%. More buyers adjusted their budgets for home shopping in 2022, as their purchasing power dropped by 25%.

Inflation also increases construction and homebuilding costs. The National Association of Home Builders reports that less than 10% of new homes priced under $300,000 were available in April 2022. In comparison, that share was 25% in 2021.

So how does inflation affect housing prices? Both homebuyers and sellers face challenges when inflation increases housing prices. Buyers may experience steeper interest payments on their mortgages, while sellers may have trouble selling before they buy a new home.

How Does Inflation Affect House Prices?

Housing prices often rise during inflation, which is favorable for existing homeowners. The supply of houses for sale is low, while demand from prospective buyers is high. Many homeowners put their homes on the market during inflation to receive offers above market value.

As inflation rises, budgets tend to tighten. For homebuyers, high inflation rates limit their financing options. The mortgage rate is one of the key factors determining whether a person can afford a house. 

During inflation, rent prices increase because buyers cannot afford homes. Advisors recommend that investors hold on to their real estate as a hedge against inflation, as housing prices usually increase over time. 

Give Altitude Home Loans a Call Today

Altitude Home Loans can provide home loans, buying advice, and more information to answer the question “how does inflation affect housing prices?” Our loan officers know which mortgage option will work best based on your unique financial situation. We can let you know the necessary documents for a mortgage refinance to speed up the process. 

Contact Altitude Home Loans in Tucson, AZ, to buy a new home or refinance your mortgage. Call us at (520) 500-1010.

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What Is Private Mortgage Insurance, and Do I Have to Pay For It?

When owning a home, homeowners insurance plays an integral role in protecting your investment and ensuring you aren’t responsible for excessive costs. However, it can be challenging to sort through the different types of home insurance to determine what is essential. If you are considering home loans in Tucson, this article will explain private mortgage insurance and whether you need to pay for it.

What Is Private Mortgage Insurance?

Private mortgage insurance (PMI) is a type of insurance that protects mortgage lenders in case the borrower fails to repay the debt. While this coverage does not protect you from the costs of home ownership, it is essential to allow lenders to offer loans to a broader range of applicants. By protecting themselves from the risk of nonpayment, lenders can take more significant risks with the loans they offer.

While PMI is critical to many mortgage agreements, it isn’t always needed. Lenders do not require this coverage for all loans, so read the following section to determine when lenders will apply this cost.

When Is PMI Required?

Although PMI is an unavoidable cost for many home buyers, not every mortgage includes coverage. Conventional loans often have this coverage, but the down payment makes an impact as well. Many homeowners can avoid paying for this coverage by providing a more significant down payment or boosting credit scores to improve offers. 

Do I Need To Pay For PMI?

While PMI may be a burden for some potential home buyers, many people need to pay the cost in order to purchase a house. Lenders commonly apply the cost to your monthly payments but may also make other payment options available. One of these alternative options is typically a one-time payment, which can be an excellent option for those interested in minimizing monthly expenses.

Get Mortgage Help in Tucson Today

Purchasing a home is a stressful but rewarding process. While there are many decisions to make and factors to consider, owning a home you can genuinely be proud of makes everything worth it. Additionally, working with an experienced and helpful mortgage lender can dramatically simplify the process and help you get the keys to your new home as soon as possible.

At Altitude Home Loans, we strive to make every step of the home buying process as easy as possible for our clients. You can visit our website to learn more about the mistakes that first-time home buyers make and find other helpful articles and answers to frequently asked questions. When you turn to Altitude Home Loans, you can ensure your buying process goes as smoothly as possible.

We offer excellent rates and friendly service to clients across Arizona. Our team is passionate about helping community members achieve their goal of home ownership, so never hesitate to reach out with questions or concerns. Now that you know about private mortgage insurance call Altitude Home Lending at 520-500-1010 to find the best home mortgage lender in Tucson.

refinance facts altitude home loans

7 Mortgage Refinance Facts and Myths to Set the Record Straight

Refinancing for the first time might make you uncertain of what to expect. At Altitude Home Loans, we strive to provide you with innovative mortgage refinancing options. Let’s explore the common refinance facts and myths so that you can approach home refinancing in Tucson with confidence.

Myth#1: You Will Not Save Enough Money

Depending on the interest rate on your current loan and the rates today, you can save money by refinancing. Even a half-point reduction in your interest rate could save you a significant amount of money over the life of the loan. 

Myth#2: You Need Perfect Credit to Refinance

Refinancing options for homeowners with bad FICO scores do exist. Most lenders know that late payments or other bumps in the road may show up on your credit report. Ask an expert financial advisor how to improve your credit score. 

Myth#3: You Need Expert Knowledge About Refinancing 

Many people assume that they need to understand the mortgage process for refinancing. Before you meet with a lender, you may find it helpful to brush up on your knowledge. No matter how little you know, do not let this stop you from lowering your mortgage. 

Contact a financial advisor for assistance and find the break-even point for your loan amount. Keep reading the refinance facts to learn about the most common misconceptions. 

Myth#4: You Lose Equity by Refinancing

Refinance loans can help you build equity since you pay off your mortgage faster. Some refinance loans offer the option of drawing on your home equity like a cash-out refinance. Getting a lower interest rate or shortening your mortgage term will not affect your equity.

Myth#5: You Can No Longer Sell Your Home

Refinance loans replace an existing mortgage and do not prevent the sale of your home. Unlike home equity loans, a refinance does not place a lien on your home. If you sell your home, you must repay the loan or make the repayment from the sale.

Myth#6: You Should Only Refinance for Lower Interest Rates

Many homeowners believe refinancing makes sense if interest rates dip below their mortgage rate. However, borrowers can save money by refinancing a 30-year loan to a 15-year loan. While this could result in higher monthly payments, it will save you tens of thousands of dollars in interest.

Myth#7: You Cannot Negotiate Closing Costs

Refinancing does require you to pay closing costs. Normally, you cannot negotiate loan origination and application fees imposed by mortgage lenders. However, you can negotiate the recording fees set by the state or local government.

Altitude Home Loans: Trusted Mortgage Refinancing Company

When you refinance, you get a new mortgage to pay off your current one. A trusted financial advisor can debunk the most common myths and provide you with up-to-date refinance facts. Altitude Home Loans can help you navigate refinancing, talk about your finances and mortgage loan truths, and save money. 

Contact Altitude Home Loans today to discuss refinancing your home. Call us at (520) 500-1010.


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