What buyers and sellers should know about interest rates and inflation.

One of the questions we're getting asked almost every day is: How are interest rates being impacted by inflation? We've been tracking this closely because higher rates have greatly impacted our real estate market. Rates were rising for a while, but they're finally starting to come down. For reference, we saw as high as 8% interest rates. Today, we're sitting between 5.5% and 6%.

We've seen five consecutive positive inflation reports, which means what the federal government is doing is working. We're seeing prices come down across the board because interest rates are lower. A difference of two points on a lot of properties can be up to thousands of dollars per month on your monthly mortgage payment, so when interest rates move, it's a big deal, and it's something that buyers keep a very close eye on.

“Interest rates were as high as 8%, but now they’re sitting between 5.5% and 6%.”

However, it's also something I want sellers to keep an eye on because it impacts how many buyers are in the marketplace to buy their homes. Of course, the report that came out yesterday showed that the federal government would raise interest rates by 0.25%. That doesn't mean that home prices or mortgage rates will be impacted. It just means that they are slowing the aggressive nature of rising rates to combat inflation.

We've seen five positive reports, and I expect we'll see another one in March. For right now, the real estate market is starting to heat up, and with rates entering the mid-fives, we're starting to see multiple offers again, and we're starting to see buyers getting into the marketplace because they know what's happening. They know when interest rates go down, prices go up. We may have another month or two of this buyer's market that we've been in strictly based on interest rates and the environment around interest rates. When we see those plateau and things return to normal, I think we'll begin to see a very neutral marketplace.

If you're in the market to buy or sell a house right now, it's very important that you stay informed on what's going on with inflation and with interest rates because they're directly correlated. If you ever have any questions or want to have a conversation, please call or email at any time.