How does inflation impact home prices and mortgage rates?
How does inflation impact home prices and mortgage rates?
Inflation generally leads to higher home prices and mortgage rates. As the cost of goods and services rises, construction materials become more expensive, which increases the cost of building new homes, driving up prices. Additionally, the Federal Reserve typically raises interest rates to combat inflation, which leads to higher mortgage rates. Higher mortgage rates make borrowing more expensive, potentially reducing demand for homes and slowing down price growth. However, in some cases, inflation can actually drive more demand for real estate as investors seek tangible assets to protect against the eroding value of money, which could keep home prices high.