Inventory, Inflation, & Interest Rates

Today I’ll address the three I’s of the market: inventory, inflation, and interest rates.

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If you’re like me, you’ve been watching the news and hearing a lot about housing inventory, inflation, and interest rates. You might be wondering how these three factors will affect people who plan to buy and sell. If so, today I’ll happily address the three I’s of our current market.

Let’s start with inventory. Nationally, housing inventory is down by about 27%, meaning there are currently 27% fewer homes coming onto the market than there were a year ago. Here in the Northern Virginia area, we’re down a little over 14% year over year. That shows that we’re in an aggressive market; demand for properties is high, but there simply aren’t enough houses to go around. In turn, that means buyers have compete against each other for the same homes.

The good news is that some people have held off on selling their homes due to circumstances like COVID, so there are a lot of pent-up sellers who are ready to put their homes on the market. There may be an influx of supply in the future.

Now let’s move on to inflation. Many are wondering if they should buy a home now or wait until prices come down. I don’t have a crystal ball, so I won’t be able to tell you if or when home prices will drop, but I can say that inflation definitely is impacting the housing market. Looking all the way back to the 1970s, we can see that when inflation goes up, so too do the values of properties (with the exception of the early 2000s—but we all know what happened back then). Given that we don’t know when prices will come down, it may be better to buy now than to wait.

We're in an aggressive market. 

Finally, let’s talk about interest rates. When interest rates rise, a buyer’s purchasing power decreases. So since rates are on the rise this year, are homes even affordable?

To help answer this, refer to the chart at 4:46 in the video above. The chart shows the average rates for 10-year Treasury rate and 30-year fixed-rate mortgages over time since 1972. Over the last 50 years, the 30-year mortgage rate has moved in unison with the 10-year Treasury rate, trending downward since the '80s. Despite rate increases this year, rates are still historically low, meaning that now is a good time to lock in a lower interest rate before they get any higher.

If you have any questions about what’s going on in the market or how it affects your real estate prospects, don’t hesitate to give me a call or send me an email. I’d love to hear from you.