Last updated on January 31st, 2023 at 05:58 pm
If buying or selling a home is on your to do list this year, then you might be watching the economy more closely than usual. Terms like inflation and recession are part of the daily news, so if you’re feeling anxious about what this could mean for your real estate goals, keep reading.
Always bear in mind that talking to an experienced real estate agent is one of the best ways to prepare for selling your home. However, you can also research how inflation will affect the housing market by reading the news, following real estate agent blogs, and looking at your area’s housing market.
Let’s take a quick look at some things to know if you want to better understand how inflation may affect the real estate market.
How Does Inflation Affect the Housing Market?
If you’ve noticed the cost of goods and services is on the rise, then you’re already familiar with inflation. Inflation is when the cost of goods goes up, and this can go hand-in-hand with a recession—generally defined as when business activities decrease for two quarters in a row.
Inflation is a part of any economy, and when the market price of goods and services goes up, it doesn’t necessarily lead to a financial crisis. However, inflation and a recession can cause real estate price shifts and could change how homeowners make decisions.
Home prices could decline with inflation
With inflation on the upswing, some real estate experts say that home prices could go down. That’s because buyers may decide to put their plans on hold as mortgage rates rise.
With economists talking about the possibility of a recession in 2023, many people are also cutting back on spending and watching their budget more carefully. If moving isn’t a necessity, potential buyers may decide to take a wait-and-see approach.
Sellers who need to act now may lower their prices to attract more people to their listings, or may consider selling a house to an investor, such as an iBuyer, for a lower price.
Homes may fluctuate in value
If the price of homes for sale goes down, then other real estate values will also shift. However, changes in real estate values come from many factors. As with the cost of any other good or service during inflation, the price can vary.
Home buyers and sellers should always be flexible and prepare for multiple scenarios. Working with a trusted real estate agent will make things easier.
Making repairs and renovating may cost you more
With rising inflation and the potential for a recession, it can also cost more to make upgrades to your home—whether that’s in preparation to sell or just because you want to update your house for your own comfort.
Homeowners would be wise to plan for these upgrades and repairs to cost more. Research the current market for contractors and other services you’ll need to know what to expect.
Buyers and sellers may need to be more patient
The answer to whether or not inflation is affecting the housing market can vary from city to city and state to state, but the bottom line is that buyers and sellers should be prepared for some market shifts.
No matter what kind of market you are buying or selling in, being patient and flexible can help you move forward even with rising inflation.
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