Inflation and the housing market: What buyers and sellers should consider now

The economy is weird right now. The pandemic has upended daily life for almost everyone, the Federal Reserve is trying to stave off even more dire conditions by lending money for next to nothing, and the unemployment situation remains precarious.

Even so, real estate has remained an unusual bright spot, because homeowners and would-be buyers were generally less affected, monetarily speaking, by the pandemic than renters.

Although the housing market has remained strong, it’s not immune from outside economic forces, including inflation. Inflation essentially is an increase in the prices consumers pay for goods and services.

A small amount of ongoing inflation is considered normal, but the rate of inflation has been rising recently, affecting everything from how much you pay at the pump to the listing prices of homes.

“By keeping interest rates this low for this long, what they’ve done is they’ve created an everything bubble. It’s not just the housing market,” Desmond Lachman, a senior fellow at the American Enterprise Institute, previously told Bankrate.

Compounding the inflationary pressure on housing, the limited number of homes available for sale is pushing prices up rapidly. That low inventory is due partly to pandemic-related construction delays and partly because many homeowners who would otherwise have moved chose to postpone putting their properties on the market during lockdowns.

Taken together, these conditions are favorable for sellers, who are often receiving many offers above asking price, but the market can be extremely frustrating for buyers, who can struggle to make the winning bid.

What to consider if you want to sell your home
If you’re looking to sell your home right now, you shouldn’t have too much trouble. The real issue could be what happens on the other side of the transaction. When you go to purchase your next place to live, you’ll be joining the scrum of eager buyers competing for a limited number of available properties.


  • The pandemic has shifted priorities for a lot of homebuyers, and many newly-minted remote workers sought out more space.
  • Although more people wanted to move, the number of listings did not keep up, which forced prices up — a great thing for sellers.
  • Buyers have had to offer more and more money to compete, and many even waived conditions like inspection and appraisal contingencies in their contracts.
  • Many housing experts think we’re near the top of the market in terms of prices, so it’s a great time to sell overall.


  • Selling is easy, but finding another home is hard, especially for people looking to downsize, because they may find themselves in an even more competitive market segment.
  • Home prices are up by more than 17 percent since last year, according to the National Association of Realtors, which means the proceeds from your sale won’t go as far when you move to make your next purchase.
  • Low inventory, high prices and high rents may make it hard to find your next home.

What to consider if you want to buy a home

Even in this crazy market, you can still snag a great home if you play your cards right and make sure the numbers work for you. It’s especially important to get preapproved for a mortgage before setting out to look for homes, and make as big a down payment as possible, to show sellers you’re serious and your financials are sound.


  • Mortgage rates have never been lower. You may have to pay more for your house than you’d like to, but your borrowing costs will be lower, so you may be able to afford that bigger loan without stretching too much
  • Although home prices are high, most experts say this current housing cycle should not be a repeat of 2008, when the bursting bubble triggered the Great Recession. If you buy now, you may see some short-term losses if you try to sell the property again too soon, but there shouldn’t be a huge wave of foreclosures like there was a little over a decade ago.


  • The intense seller’s market means buyers need to be prepared for bidding wars and to lose out on multiple properties before finally sealing a deal.
  • You may need to reevaluate your budget or must-have list: Most homes sell over-asking these days, so your dollars may not go as far as you hoped.
  • You could see your property value decline after you close once the market cools off, but experts say a trend toward foreclosure is not on the horizon, and if you’re buying your forever home, the value should eventually recover.

Should you wait for inflation to decrease and inventory to increase?

There’s no perfect time to buy a house, so it really comes down to what you’re comfortable with. If the numbers work for you now, and you can secure a mortgage that has monthly payments you can afford going forward, then it’s a fine time to buy if you can make the best offer.

Otherwise, it could be worth it to wait until market conditions favor buyers a little more, or see if you can adjust the geographical area or physical parameters of your housing search.

No matter what you decide to do, it’s important to get your finances in order so you’re in as strong a position as possible when you do decide to enter the homebuying fray. If you wait, you can use the time to keep contributing to your savings. Your down payment fund may go farther in a cooler housing market, after all.

You Should Still Buy a Home Right Now

It’s a seller’s market for homes all around the country right now. People are going into bidding wars and home prices are coming in well above asking. If you’re considering buying in the 2021 housing market, it’s only reasonable that you might be intimidated. But have no fear: There are great reasons to continue house hunting.

Interest rates are still low, there’s more inventory available than you might think, investors can get in on the 1031 exchange (while it still exists), and there are deals out there for future landlords and house hackers. Don’t let fear keep you from finding the perfect house this year. Ahead, real estate agents share the top five reasons why you should still buy a house—yes, right now.

1. Interest rates are low.
“Rates are still historically low. If you purchase a home right now, you will be paying less to borrow more money,” says Sayeeda Moore, a Re/Max Agent in Cranford, New Jersey. Wells Fargo is offering 2.875% on a 30-year mortgage, and NerdWallet says the national average is around 2.838%. According to, in 1981 that figure was 18%—and just twenty years ago it was around 7%.

While the percentage has been dropping over the past 40 years, no one expects rates to stay this low forever. In fact, forecasters are hedging their bets and making their best predictions as we speak. Many expect a hike over the next 12 months. Even a 1% increase over 30 years could mean tens of thousands of dollars go to your mortgage lender rather than into your kid’s college fund or your retirement accounts. This is about as close to “free money” as mortgages are expected to get.

2. There are lots of houses for sale.
For many years, agents lamented that there just wasn’t enough inventory. This means that all the people who owned the most coveted houses in favored neighborhoods were staying put. These days, however, teleworking policies have created geographic freedom; homeowners are now unanchored. They are exercising their options to cash out on their beloved homes to try out lower cost-of-living cities.

“Although we are facing a housing shortage, the number of homes for sale is increasing, which means more choice for potential buyers,” says Natasha Tomlinson, who has been an agent in Arizona since 2005.

More choice is a good thing. Buyers can be picky about finishes and features that they would have likely been stuck with if they bought a home just a few years ago. Now, real estate agents can find the perfect house for their clients—because there are a lot more houses to choose from.

3. Owning still beats renting.
“When renting, you’re building your landlord’s wealth,” says Tomlinson. “Your monthly payment depends on rising rents, and you don’t benefit from home appreciation. When you own property, you’re building your wealth. Your monthly payment is locked in, and you benefit from appreciation.” Homeownership—and the equity it brings—is still a key factor in wealth building for most Americans.

Saving up a sizable down payment to purchase a house might be difficult, but “the cost to purchase a home right now in some areas is lower than the cost of renting,” says Moore. It is important to find the right mortgage rates and terms to lock in long-term savings that keep monthly payments low.

4. Buying lets you put down roots.
Wealth-building aside, if you plan to live somewhere long-term, it is always best to own. Renting can be precarious, even if the actual cost is predictable. How so? Rents can be raised at any time. Landlords decide if certain repairs are done immediately or delayed indefinitely. And in many cities, renters can be booted or billed for relatively minor issues. Ownership offers security and growth that renting simply does not.

If the cost of a home is within reach, agents say that it is best for people who see themselves growing old in one town to commit to buying their dream house or retirement home today. Inflation pretty much guarantees that waiting five or 10 years down the line will result in spending a lot more money for the very same house.

5. 1031s are still in play.
“There is no way to time the market, but in every real estate cycle, the argument can be made that there is always a good reason to buy or sell,” says Moore. One of those reasons is called a 1031 exchange.

If you have a home that you’re renting out, and you’re scoping out buying something bigger or better, this capital gains tax deferment mechanism can help you make that upgrade. If you sell one investment property to buy another, this tax code might allow you to hold off on paying the taxes on the profit from the first sale until you decide to sell that second property. Many investors never plan to sell that second property, so they are able to quickly go from house-hacking in a single-family home to owning large-scale apartment buildings that they never could have afforded before.

The urgency to buy now is tied to news that the Biden administration is considering revamping the 1921 tax code to limit this deferment. While nobody can predict the future, aspiring real estate investors might want to make their move now. If the tax code changes, selling a small rental for a higher-value property or a commercial portfolio might become more costly.

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