Inflation and How it Affects the Market 

If you are in the real estate world — or if you are at minimum thinking about buying or selling a home — then educating yourself on the housing market can be helpful. Understanding the basics of supply and demand can help you grasp why something (like a house) would cost what it costs. But it’s not always as clear cut as that. Outside factors can affect the market in a variety of ways, too. So, I figured it might be helpful to talk about inflation and how it affects the market.  

Let’s start simple with that supply and demand concept. A lot of houses available for purchase (supply) would lead to lower prices. A lot of buyers interested (demand) would drive prices up. So those two factors tend to push against each other on a daily basis to set housing prices.  

Now, the term inflation is something you may have heard a lot about lately. Essentially what inflation means is that there is too much money floating around the economy. Seems like a great problem to have, right? Well, not necessarily. At least not according to the people in charge of the economy. What they do to combat inflation is raise interest rates on loans. Loans like mortgages that a lot of people need to buy homes.  

Those higher interest rates affect the market in a few ways. First, they make it harder for average homebuyers to secure a mortgage. The interest connected to the mortgage means a higher monthly payment, which reduces the amount of people (demand) who can afford to buy. Second, higher interest rates mean homeowners are resisting the urge to sell, which drives the demand down even further. Third, higher interest rates drive investors like hedge funds and commercial real estate developers OUT of their normal investments and INTO residential real estate. This leads to a drop in supply because these investors buy up property in bulk to maximize their investment. (They do this because it is more profitable than their usual investments, whatever they may be.) 

In any case, if you are looking at homes for sale in Bucks County, homes for sale in Montgomery County, and homes for sale in Philadelphia, then no agent knows more than Albright Real Estate.