What you need to know about buying a home


A real estate agent stands in the doorway as Giovani and Nicole Quiroz of Brooklyn, New York visit an open house in West Hempstead, New York.

Raychel Brightman | Newsday LLC | Newsday | Getty Images

Higher prices are almost everywhere.

Americans are paying more these days for products like food and gasoline, thanks to rising inflation.

Of course, this rising inflation will also impact the cost of buying a new home.

“With inflation rising so aggressively and the fact that people’s salaries and weekly income are not rising at the same rate, we end up with less discretionary money to spend each month,” said George Ratiu, manager of economic research at Realtor.com.

At the same time, home prices have also been rising. The consumer price index, which measures the cost of goods and services, shows that shelter rose 0.5% in October. It takes into account rent and owners’ equivalent rent, which is what owners would pay to rent their home.

Separately, home prices were up 19.8% year-over-year in August, according to the S&P CoreLogic Case-Shiller Indices.

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So what does this all mean for home buyers?

For one, you may have to lower your budget, Ratiu said.

Not only will you have less money to spend every month, since you are paying higher prices elsewhere, mortgage rates are also climbing. Buyers of a median-priced home are spending $160 more on a monthly mortgage payment than a year ago, a Realtor.com analysis shows. Ratiu expects those rates to continue to climb.

“Generally as we see inflation go higher, we are going to see mortgage rates go higher,” he said.

An inflation hedge

Real estate has historically been viewed as a hedge against inflation.

Home values traditionally at least keep up with inflation, and when you have a mortgage, you lock in a fixed monthly payment for the length of the loan.

“Homes are expensive now … but for most people the comparison that is most important is how that cost of home ownership is going to compare to the cost of renting,” Zillow senior economist Jeff Tucker said.

Advice to homebuyers

Roberto Westbrook | Tetra images | Getty Images



Read More:What you need to know about buying a home

2021-11-23 16:19:14

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