One of the hottest topics in the news lately has been inflation. It affects our grocery costs. It affects our gasoline prices. But it also affects the real estate market. How? Read on to find out.
Inflation and the Real Estate Market
Construction Costs
The cost of building materials, from lumber to nails, rose significantly over the past couple of years. Part of this was due to the pandemic. But part of it comes from inflation. When prices for materials go up, builders raise the price of their homes to compensate.
Sale Prices Go Up
As I mentioned above, the higher cost of building materials gets passed along to the buyer. This includes "flippers" who rehab older homes and resell to buyers. However, the cost of building materials isn't the only factor in increasing the sale price of a home. When the central bank decides to release more money into the economy, this makes both inflation and home prices rise as well.
Rising Costs of Borrowing Money
Interest rates affect more than just mortgages. Higher interest rates make it more expensive to incur any kind of debt where borrowing money is concerned. Credit cards. Car loans. Some student loans. In turn, this affects a home buyer's ability to afford some homes.
How Does it Affect Current Homeowners?
If you bought your Tucson home with a fixed-rate loan, you should not see much change there. Your property taxes and your insurance may rise. But that is something every homeowner should expect anyway. However, if you want to sell your property, you may find yourself in the same boat as other home buyers...contending with higher home prices and higher interest rates to borrow the money to pay for your new home. Even so, it may still be a good time for you to sell your Tucson home right now. Talk to your real estate agent and/or lender to determine if that is the case.
Finally, I just wanted to give a quick shout-out to our local Catalina Foothills High School Marching Band. They performed at the Pasadena Rose Parade yesterday. Congratulations on a job well done, everyone!
Rebecca Schulte, Schulte Real Estate Group, Your Source for Tucson Real Estate
