Let’s consider the chart and quoted rates. First, the residential mortgage market has increased by 2% points since Christmas of 2021. If we add in the quoted points, the rate today for a 30-year conventional mortgage is 5.35 to 5.5% depending on lender and credit scores. We are seeing prices of everything we buy, especially food and disposables going up sharply, with the Federal Government showing an 8.5% inflationary jump in the past 12 months.
Why?
A combination of things that our popular media has difficulty explaining, but the majority is the trillions of Federal stimulus money created to provide relief for the effects of the pandemic. If money is created without economic support, then the result is inflation, which reflects in the price of everything. Energy policy limiting the future of petroleum products, or shifts in import volume contributes, and there is some effect based on the ego-driven war in Ukraine. Of course, easy money and a lack of housing inventory has worked to push housing prices beyond any reasonable expectation, but that has been a slowing rolling train wreck over a period of years. Increased family formation coupled with a lack of product forces prices higher, in some cases at bank-breaking levels.
Will things get better? Of course, but it will get worse before it gets better, and it will take a while. The United States has to recover from the shock of too much money and increase our production output to compensate. We will leave that problem to the nice economists to explain.
Novella Real Estate