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  • Inflation, recession, high rates… What is the truth past the headlines?

    July 12, 2022
  • The headlines have been heavy with talk of inflation, high interest rates and even the possibility of a recession lately. Many may be wondering what this means in general, but especially what this means for the housing market. It’s easy to get wrapped up in the panic of it all, so we’re laying out the facts. Here’s what you need to know about what’s really behind all these headlines…

    A recession does not equate to a housing crisis

    In the past four decades, we’ve seen six recessions in this country. During those six recessions, home prices actually appreciated more often than not. In fact, home prices increased four out of six times. Not only are we not in a recession today, but even if we were to enter into one, time and time again history shows that a recession does not equal a housing crisis. 

    High inflation and high interest rates do not mean low home prices

    An increase in inflation and an increase in mortgage interest rates are not directly correlated with home prices. Just because inflation and interest rates are on the rise, does not necessarily mean that home prices will fall or that we will see a market crash. Simply put, it just means that the rate at which home prices are increasing may slow. Home prices are still expected to rise in the near future, just at a more normal rate.

    We do not expect a redo of 2008

    We can’t emphasize this point enough… What we are dealing with today is nowhere close to what happened in 2008. In the past, it was much easier to obtain a mortgage. Today, there are strict guidelines and verifications in place that prevent those who aren’t truly ready for homeownership from becoming homeowners. In addition, if home prices did unexpectedly drop, today’s homeowners are sitting on record amounts of equity and would theoretically have the ability to sell their home and pay off the mortgage versus falling into foreclosure. All in all, we have many rules and regulations in place to prevent a scenario like 2008 ever happening again.

    In summary, the attention-grabbing headlines we are seeing today are just that… Attention grabbers. If you have questions about where the housing market is heading or how you can best approach purchasing a home in today’s climate we are here for you now and always.  Call us today at 651-552-3681 or simply apply online right on this website to get started! 

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    Bove, T. (2022, April 22). A major mortgage company is prediction a recession, but the red-hot housing market could bring relief. Fortune. Retrieved June 1, 2022, from https://fortune.com/2022/04/22/fannie-mae-moderate-recession-hot-housing-market/

    Crew, K. C. M. (2022, May 18). The one thing every homeowner needs to know about a recession. Keeping Current Matters. Retrieved June 1, 2022, from https://www.keepingcurrentmatters.com/2022/05/19/the-one-thing-every-homeowner-needs-to-know-about-a-recession/

    ESR Group. (n.d.). Inflation rate signals tighter monetary policy and threatens ‘Soft landing’. Inflation Rate Signals Tighter Monetary Policy and Threatens ‘Soft Landing’ | Fannie Mae. Retrieved June 1, 2022, from https://www.fanniemae.com/research-and-insights/forecast/inflation-rate-signals-tighter-monetary-policy-and-threatens-soft-landing

    How will inflation affect the housing market in 2022? (podcast). Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports. (2022, May 2). Retrieved June 1, 2022, from https://themortgagereports.com/91212/inflation-housing-market-2022-podcast