MARTHA’S VINEYARD HOUSING MARKET
Are you concerned about inflation and mortgage rates and how they might impact your plans to buy a home in Martha’s Vineyard? Understanding the recent decision made by the Federal Reserve (the Fed) can shed some light on the situation. Here’s what you should know.
INFLATION AND THE HOUSING MARKET
Despite the Federal Reserve’s efforts to control inflation, recent data shows that the inflation rate is still higher than the desired target of 2%, although there has been some improvement. In response to this, the Fed decided to raise the Federal Funds Rate last week. This decision was made to cool down an economy that had rebounded strongly from the 2020 recession caused by the coronavirus.
While the Fed’s actions don’t directly determine mortgage rates, they do have an impact and played a part in intentionally slowing down the housing market last year.
HOW THIS AFFECTS YOU
High inflation leads to increased everyday expenses, affecting various aspects of your life. Martha’s Vineyard has experienced the impact of inflation, with higher prices for everyday items like groceries and household products, similar to off-Island areas. Inflation has also affected the cost of housing, including rental properties and real estate prices. One area that has seen significant price increases is construction costs, involving trades such as electricians, plumbers, painters, and HVAC companies. The materials associated with these trades have substantially risen in price over the past three years.
As a popular tourist destination, Martha’s Vineyard has also felt the effects of inflation on hotel accommodations, dining out, and recreational activities. Increased operational costs for businesses, such as labor and supplies, contribute to higher prices.
By raising the Federal Funds Rate, the Fed aims to lower inflation. If successful, this could potentially lead to lower mortgage rates and improved affordability for homebuyers. Generally, when inflation is high, mortgage rates tend to be high as well. However, as inflation cools down, experts suggest that mortgage rates are likely to fall.
WHAT EXPERTS PREDICT FOR MORTGAGE RATES AND INFLATION
Moving forward, both inflation and mortgage rates will continue to influence the housing market. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), mortgage rates are expected to decrease later in the year as consumer price inflation subsides. Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), also anticipates a downward trend in mortgage rates throughout the year as the economy slows.
While it’s impossible to predict mortgage rates with certainty, experts believe that rates will trend downward this year if inflation continues to decline. To stay informed on the latest developments, it’s advisable to connect with a trusted real estate advisor who can provide insights on market changes and their potential impact on your homeownership plans.
It’s important to note that although inflation has affected the pricing of goods and services, housing prices on Martha’s Vineyard have remained stable. There hasn’t been a significant drop in prices, and with many homes entering the market before the busy summer season, any potential decrease is not expected until closer to fall.
BOTTOM LINE
Don’t let the headlines about the Fed’s recent decision confuse you. The direction of mortgage rates depends on the trajectory of inflation. If inflation cools down, mortgage rates are likely to decrease. If you can afford to buy a home and have been considering it, now is still a good time to make a purchase. Remember, you can always consider refinancing if mortgage rates go down in the future. Connecting with a real estate expert will ensure you have access to up-to-date insights on housing market changes and their implications for you.
Please reach out if you have any questions, I’d love to connect and be your trusted Real Estate Advisor! 😊 Email: info@marandapostrealtor.com
