Understanding Inflation, Mortgage Rates, and Home Buying this Fall in Kansas City


Understanding Inflation, Mortgage Rates, and Home Buying this Fall in Kansas City

The two top issues facing the Kansas City real estate market are mortgage rates and inflation. Let's look at where they are heading . . .

How is Inflation Affecting the Real Estate Market?

The inflation rate in Kansas City has reached a 40-year high and most Kansas Citians have felt the effects of inflation at Quick Trip, Price Chopper, and Wal-Mart. Inflation might have even stalled your plans to save money or buy a home.

Although the Federal Reserve is trying to catch up and lower inflation, the recent economic data is showing that the rise of interest rates has still not lowered inflation. The stock market reacted to the news negativity and hints of a recession have been sparking since the news. 

“. . . the Fed has raised rates again, announcing yet another three-quarter-point hike on September 21 . . . The hikes are designed to cool an economy that has been on fire. . .”

Mortgage rates do not directly parallel the FED interest rates but are heavily influenced by the Fed's central bank's policy and actions. The Fed is trying to tank the economy and the rise in interest rates is contributing to the current slowdown in the Kansas City real estate market. A recent article from Fortune explains:

“As the Federal Reserve moved into inflation-fighting mode, financial markets quickly put upward pressure on mortgage rates. Those elevated mortgage rates . . . coupled with sky-high home prices, threw cold water onto the housing boom.”

How will the Rising Mortgage Rates is Slowing the Kansas City Real Estate Market

In 2022, mortgage rates have increased from just a little over 3% to above 6% according to Freddie Mac. This is the first time since 2008 that Kansas Citians have seen rates over 6%.  (see graph below):

How an Expert Can Help You Understand Inflation & Mortgage Rates | MyKCM

As the FED has increased interest rates, the mortgage interest rates have followed suit and have increased. These increases have slowed down the home buying frenzy over the past couple of years. Only 4 months ago a buyer making an offer on a home in Olathe might have been one of 30 buyers making an offer. Today, that same home would generate much fewer offers.  As the buyer frenzy has slowed down the inventory of homes for sale has increased here in Kansas City. Although the real estate market is still a seller's market, the real estate market is starting to change.

Economists Say the Real Estate Market will . . . .

Less buyer demand and higher mortgage rates have started to have a negative effect on the Kansas City real estate market. A recent article from CNET outlines the connection between inflation and mortgage rates in simple terms:

“As a general rule, when inflation is low, mortgage rates tend to be lower. When inflation is high, rates tend to be higher.”

Sam Khater, Chief Economist at Freddie Mac, said this about the future of mortgage rates:

“Mortgage rates remained volatile due to the tug of war between inflationary pressures and a clear slowdown in economic growth. The high uncertainty surrounding inflation and other factors will likely cause rates to remain variable, . . .”

No one has a crystal ball and can predict with 100% certainty where inflation and mortgage rates will head and how they will affect the Kansas City real estate market. But the Dowell Family Team of Berkshire Hathaway HomeServices KC Realty has been keeping an eye on the market and will help you decide whether it is a good time for you to buy or sell now. By connecting with trusted advisors like the Dowell Family Team, you will have a pulse on the local real estate market.

Bottom Line

The high inflation and rising mortgage rates have caused unfavorable conditions in the Kansas City real estate market. For professional insights on the current direction in the housing market and what they mean for you, whether buying or selling, let’s connect.

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