Should You Buy A House During Inflation? - Northern Credit Union (2024)

Are you considering buying a house but questioning if it’s the right time due to the market? At Northern Credit Union, we understand the challenges that come with buying a home during periods of high inflation and how essential it is to arm yourself with as much information as possible before making any large decisions. Fortunately, we’re here to help make the decision as easy as possible. We’ve got you covered with everything from what inflation is and the pros and cons of buying a house during inflation and tips for getting started. Let’s dive in!

• What Is Inflation? Inflation is an economic term that refers to a rise in the prices of goods and services over time. It’s when there is too much money chasing too few goods, which leads to an increase in prices. Inflation can have both positive and negative effects on the economy, and when it comes to buying or selling a house.

How Does Inflation Affect The Housing Market?

• Impact On House Prices. Inflation can lead to higher housing costs because, as more people look for homes, demand increases, and therefore, so do home values. At the same time, existing homeowners also see a rise in the value of their property. Not only that, but inflation can also increase the price of rent. Because of all these factors, homeowners see the appreciation of their homes over time.
• Impact On Mortgage Rates. Inflation also impacts financial institutions which usually results in an increase in mortgage rates. As a result, borrowers may be required to pay more each monththan they would if inflation were not an issue. Keep in mind that refinancing your mortgage for a lower monthly payment is always an option down the road once rates go down.
• Impact On Home Affordability. When inflation increases, the cost of living also rises, which reduces the disposable income available for people seeking homes. On the positive side, deposit product dividends (such as interest checking and share certificates) typically increase during times of inflation, providing the opportunity to earn more interest while saving up for a home to help combat the higher cost of living.

Should You Buy A House During Inflation?

Ultimately, this important decision must be made depending on your specific needs at the time. To help determine the right next step for you and your family, let’s take a look at the pros and cons of buying a house during inflation.

• The Pros: One advantage of buying a home during inflation that you might not immediately consider is the potential for having more purchasing power today. If inflation continues to rise, your money will be worth less and less, giving you less purchasing power than before. It’s important to remember that even with inflation, now might still be the best time to buy if inflation is expected to increase.

Another important point to note is with the increase of housing prices during inflation, rent prices tend to increase as well. If you purchase a home at this time, what you pay for your monthly mortgage payment may end up being less than what you would pay to rent.

• The Cons: On the other hand, buying a home during periods of high inflation can be riskier. It is important to buy a house that fits your budget and does not put you in a tight place financially. While we would all love a crystal ball, no one can perfectly predict when inflation will ease up, which can result in falling housing prices. In other words, your home could potentially lose equity. This is the risk all homeowners take when purchasing real estate at any time.

Tips for Buying A Home During Inflation

If you’re ready to move forward with purchasing a house, congratulations! Here are some tips to help you along the way.

1. Research Beforehand. It’s essential to do your research before buying a home so you can get the best deal possible (like a meet-or-beat guarantee). It’s wise to talk with lenders or real estate agents who can provide helpful insight into financing options available during periods of high inflation.
2. Work With A Trusted Home Lender. Pick a loan partner you trust, so you will have someone who will understand your full picture and long-term goals and keep you informed throughout the process.
3. Compare Options. Take some time to compare different options when shopping for a home loan, such as fixed-rate mortgages versus adjustable-rate mortgages or conventional loans versus FHA/VA loans for first-time buyers. This will help ensure you find an option that meets both your financial needs and goals.
4. Boost Your Credit Score. If possible, pay down debt before applying for financing to improve your chances of approval at better interest rates and other attractive terms and conditions. Don’t have a perfect credit score? Don’t worry, financial institutions like Northern look at more than income and credit scores when reviewing mortgage applications but rather use local decision-making to help our members get into the home of their dreams.
5. Consider Buying Soon To Lock In Today’s Prices. Another reason why it might be beneficial to buy a house now rather than waiting until later is that prices could continue rising. This is true regardless of when you decide to buy a house. Keep in mind, that the increasing demand brought about by economic uncertainty can create higher levels of inflation. Locking in prices today could save you money in the long run if rates continue to rise.

Get In Contact With Us At Northern Credit Union

At Northern, we offer competitive mortgage and loan options to help make homeownership more attainable—even when inflation is on the rise. Our team of experienced lenders can provide personalized advice and guidance tailored to your individual financial needs and goals. We’ll work with you to ensure you’re making an informed decision about investing in real estate during these uncertain times.

Above all, we’re here to help you realize your dreams by providing you with affordable lending solutions even during difficult times like those brought upon by higher levels of inflation. If you’re ready to get the ball rolling with purchasing your new home, contact us today and let us help you make the home-buying experience as easy as possible.