So what’s going on right now that we are talking about inflation? To put it into perspective, inflation rates right now are at 7.5 percent, the highest they have been since February of 1982, and they have been surging for several months now.

What does this have to do with real estate? Well, for one, the general concern right now is that interest rates may have to rise steeply to combat that surging inflation. Today, interest rates rose again and now sit at about 4.23% for a fixed 30-year mortgage, up from 4.042%  yesterday. Just a couple of weeks ago, it was 3.68%. However, buyers should not panic just yet. These interest rates are still historically low!

Second, the rising interest rates should moderate price growth in the DFW area for 2022. We should see more inventory because some buyers will begin to pull out of the market because of higher interest rates. We do not expect to see a price correction in 2022 but the consensus is that we may see some type of correction in 2023 in DFW but are mostly insulated from a large correction because of the relocations of jobs and people from other parts of the country to our area.

What’s contributing to this rise in inflation and subsequently, interest rates? Well, multiple factors. Some of them include high energy costs, labor shortages, supply chain disruptions and strong demand. Think about the cost of used vehicles right now – or lumber prices.  

During the pandemic, people stayed home and were spending less and ordering less of certain items. So what happened? Business owners upped those prices to recoup what they were losing from doing a lower volume of business. So the price of certain goods increased. Supply chains were also disrupted, due to sickness and lockdowns. Also, when there is a shortage of people to work, wages raise. So then people are paying truck drivers more and workers more, so then those companies have to increase prices to offset those factors.

Part of the mission given to the Federal Reserve by Congress is to keep prices stable–that is, to keep prices from rising or falling too quickly. The “Fed” basically seeks to control inflation by influencing the interest rates. When inflation gets too high, the Fed typically will raise interest rates to slow the economy and bring inflation down.

Inflation is affecting both renters and buyers right now. For buyers, it’s because multiple constraints have pushed up housing prices – such as the rising costs of materials like lumber. For renters, they are seeing increases as people return to cities.

Last year, housing prices in the area rose in value by an average of 20+ percent. Rent prices rose as well, as much as 15 to 18 percent throughout much of the Dallas-Fort Worth Metroplex.

In the table below, you can check out the National Association of Realtor’s data on existing single-family home sales, and how current mortgage rates compare to where they were over the past few years, along with interest rates and national prices for each year (National Association of Realtors).