How Homeownership Can Help Shield You from Inflation

How Homeownership Can Help Shield You from Inflation | MyKCM

If you’re following along with the news today, you’ve likely heard about rising inflation. You’re also likely feeling the impact in your day-to-day life as prices go up for gas, groceries, and more. These rising consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.

If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.

Homeownership Offers Stability and Security

Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.

Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. If you get a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says:

A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.” 

So even if other prices rise, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.

Use Home Price Appreciation to Your Benefit

While it’s true rising mortgage rates and home prices mean buying a house today costs more than it did a year ago, you still have an opportunity to set yourself up for a long-term win. Buying now lets you lock in at today’s rates and prices before both climb higher.

In inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. The graph below shows how home price appreciation outperformed inflation in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):

How Homeownership Can Help Shield You from Inflation | MyKCM

So, what does that mean for you? Today, experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, any home price appreciation that does occur will be good for your equity and your net worth. And since homes are typically assets that grow in value (even in inflationary times), you have peace of mind that history shows your investment is a strong one.

Bottom Line

If you’re ready to buy a home, it may make sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation and how to time your purchase, let’s connect.


NAR Report Shows Share of Millennial Home Buyers Continues to Rise

March 23, 2022

Key Highlights:

  • Millennials now make up 43% of home buyers – the most of any generation – an increase from 37% last year.
  • Generation X bought the most expensive homes at a median price of $320,000.
  • The largest share of buyers purchased in suburban areas and small towns.
  • Eighty-seven percent of all buyers purchased their home through an agent. 

WASHINGTON (March 23, 2022) – The share of millennial home buyers increased significantly over the past year. They are also the most likely generation to use the internet to find the home they ultimately purchase and most likely to use a real estate agent.

This is according to the latest study from the National Association of Realtors®, the 2022 Home Buyer and Seller Generational Trends report, which examines the similarities and differences of recent home buyers and sellers across generations.1 The NAR report found that the combined share of younger millennial (23 to 31 years old) and older millennial buyers (32 to 41 years old) rose to 43% in 2021, up from 37% the year prior. Almost two out of three younger millennials – 65% – found the home they ultimately purchased on the internet, a number that gradually decreases with older generations. Eighty-seven percent of all buyers purchased their home through an agent. This number was highest with younger millennials (92%) and older millennials (88%).

“Some young adults have used the pandemic to their financial advantage by paying down debt and cutting the cost of rent by moving in with family. They are now jumping headfirst into homeownership,” said Jessica Lautz, NAR’s vice president of demographics and behavioral insights. “While young buyers use new tech tools, they also use real estate agents at higher rates than other buyers to help find the right home and negotiate the terms of the transaction.”

Buyers from all generations agreed about the top reasons for using an agent: they wanted help finding the right home to purchase, negotiating the terms of sale and negotiating the price. The silent generation – those between the ages of 76 and 96 – as well as younger millennials were also more likely to want their agent to help with paperwork.

Those between the ages of 42 and 56 – Generation X – had the highest median household income at $125,000. They bought the most expensive and second-largest homes at a median price of $320,000 and size of 2,300 square feet, respectively. Older millennials purchased the largest homes at 2,400 square feet, and the silent generation bought the smallest at 1,800 square feet. Across all generations, the largest share of buyers purchased in suburban areas (51%) and small towns (20%).

“Not surprisingly, younger generations typically upgraded in size and price while older generations purchased more affordable properties,” Lautz said. “The majority of all generations bought single-family homes at higher shares than other housing types, and younger buyers dispelled the myth that they are flocking to city centers. When it comes to location, the suburbs and small towns are the places to buy.”

Three out of five of recent buyers – 60% – were married couples, 19% were single females, 9% were single males and 9% were unmarried couples. The highest share of unmarried couples were younger millennials at 21%. Single-female buyers significantly outnumbered single-male buyers across all generations. The highest percentage of single-female buyers was in the silent generation at 27%.

The study also found that first-time home buying among younger generations is on the rise, with over 4 out of 5 younger millennial home buyers – 81% – purchasing for the first time. Just under half – 48% – of older millennial buyers were first-time buyers.

“While the pandemic allowed many potential buyers to save for a down payment, demographics played a key role,” Lautz said. “There is a wave of millennial buyers who are aging into the traditional first-time buyer age range.” Boomers made up the largest share of home sellers at 42%, although the percentage of millennial sellers is on the rise, increasing from 22% to 26% over the past year. Lautz noted that for the first time it is now more likely for an older millennial to be a first-time seller than a first-time buyer.

“Many factors can contribute to the decision to buy or sell a home,” Lautz continued. “For all home buyers under the age of 57, the main driver was the desire to own a home of their own. Among those 57 and older, the desire to be closer to friends and family was the top reason, followed by the desire for a smaller home.”

Younger generations tended to move shorter distances when relocating. Among all ages, there was a median of 15 miles from the homes where recent buyers previously resided and the homes that they purchased. That distance was lowest among younger millennials (10 miles) and highest among older boomers (35 miles).

Overall, buyers expected to live in their homes for 12 years, down from 15 years last year. For younger millennials and the silent generation, the expected duration was only 10 years, compared to 20 years for younger boomers.

Debt continues to be a significant barrier for many when attempting to buy a home. Both Generation X and younger boomers delayed purchasing a home for five years due to debt, the longest of all age groups. Younger millennials had the highest share of student debt at 45%, with a median amount of $28,000. Twenty-seven percent of younger millennials cited that saving for a down payment was the most challenging step in the home buying process, compared to just 1% for older boomers. Nearly one in three – 29% – of younger millennials received down payment help in the form of a gift or loan from a friend or relative and 24% lived with friends or family, directly saving on rental costs.

Despite this hurdle, a vast majority of buyers have a positive outlook on homeownership. Eighty-six percent of all buyers reported they viewed a home purchase as a good investment, and roughly nine out of 10 people – 89% – said that they would recommend their agent for future services.

“A truth across all generations is that homeownership is seen as a cornerstone of the American dream,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “From building personal wealth and fostering communities, to strengthening social stability and driving the national economy, the value of homeownership is indisputable. Home buyers continue to turn to Realtors® as a trusted resource for helping find the right home and successfully navigating this increasingly complex process.”

The National Association of Realtors® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.

# # #1 Survey generational breakdowns: Generation Z: (ages 18-22); younger Generation Y/millennials (ages 23-31); older Generation Y/millennials (ages 32-41); Generation X (ages 42-56); younger boomers (ages 57-66); older boomers (ages 67-75); and the silent generation (ages 76-96).


The Federal Reserve Is Ready To Raise Interest Rates Soon Despite The War In Ukraine

SCOTT HORSLEY Twitter LISTEN· 4:10
Heard on All Things Considered

Federal Reserve Chair Jerome Powell testifies about monetary policy and the state of the economy before the House Financial Services Committee on Wednesday. Powell reiterated the Fed is gearing up to raise interest rates this month.

Federal Reserve Chair Jerome Powell said on Wednesday the central bank is on track to start raising interest rates this month — likely by a quarter percentage point — in an effort to combat inflation, which is the highest it’s been in nearly 40 years.

But the Fed will proceed with caution, Powell told the House Financial Services Committee, as Russia’s invasion of Ukraine adds more uncertainty to the economic outlook.

“The economics of these events are highly uncertain,” Powell said. “So far, we’ve seen energy prices move up further and those increases will move through the economy and push up headline inflation, and also they’re going to weigh on spending.”

The average price of gasoline in the U.S. approached $3.66 per gallon on Wednesday. Rising energy prices have been a significant driver of annual inflation, which hit 7.5% in January – the highest level since 1982.

Powell says it’s too soon to tell on Ukraine

Powell said it’s too soon to know how large or long-lasting price increases tied to events in Ukraine will be, so he and his colleagues on the central bank’s rate-setting committee are prepared to be flexible.

“We’re never on auto-pilot,” Powell said. “Those of us on the committee have an expectation that inflation will peak and begin to come down this year. And to the extent that inflation comes in higher or is more persistently high than that, then we would be prepared move more aggressively.”

Forecasters expect the Fed to impose additional interest rate hikes later this year in an effort to cool red-hot consumer demand, which has outstripped supply and driven prices sharply higher.



read the NPR full article


Are We Headed For A Housing Crash? Is The Market Heading Into A Housing Bubble?

Experts Say Home Prices Will Continue to Appreciate

Experts Say Home Prices Will Continue to Appreciate | MyKCM

It’s clear that consumers are concerned about how quickly home values are rising. Many people fear the speed of appreciation may lead to a crash in prices later this year. In fact, Google reports that the search for “When is the housing market going to crash?” has actually spiked 2450% over the past month.

In addition, Jim Dalrymple II of Inman News notes:

“One of the most noteworthy things that came up in Inman’s conversations with agents was that every single one said they’ve had conversations with clients about whether or not the market is heading into a bubble.”

To alleviate some of these concerns, let’s look at what several financial analysts are saying about the current residential real estate market. Within the last thirty days, four of the major financial services giants came to the same conclusion: the housing market is strong, and price appreciation will continue. Here are their statements on the issue:

Goldman Sachs’ Research Note on Housing:

“Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. … consumer surveys indicate that household buying intentions are now the highest in 20 years. … As a result, the model projects double-digit price gains both this year and next.”

Joe Seydl, Senior Markets EconomistJ.P.Morgan:

“Homebuyers—interest rates are still historically low, though they are inching up. Housing prices have spiked during the last six-to-nine months, but we don’t expect them to fall soon, and we believe they are more likely to keep rising. If you are looking to purchase a new home, conditions now may be better than 12 months hence.”

Morgan Stanley, Thoughts on the Market Podcast:

“Unlike 15 years ago, the euphoria in today’s home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation . . . . This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course.”

Merrill Lynch’s Capital Market Outlook:

“There are reasons to believe that this is likely to be an unusually long and strong housing expansion. Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle. Coronavirus-related preference changes have also sharply boosted home buying demand. At the same time, supply is unusually tight, with available homes for sale at record-low levels. Double-digit price gains are rationing the supply.”

Bottom Line

If you’re concerned about making the decision to buy or sell right now, let’s connect to discuss what’s happening in our local market.


What’s Driving The Sellers Advantage? An Opportunity For Homeowners Who Are Ready To Move This Season.

3 Graphs Showing Why You Should Sell Your House Now

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

There’s no doubt that 2021 is the year of the seller when it comes to the housing market. If you’re a homeowner thinking of moving to better suit your changing needs, now is the perfect time to do so. Low mortgage rates are in your favor when you’re ready to purchase your dream home, and high buyer demand may give you the leverage you need to negotiate the best contract terms on the sale of your house. Here’s a look at what’s driving this sellers’ advantage and why there’s so much opportunity for homeowners who are ready to move this season.

1. Historically Low Inventory

The National Association of Realtors (NAR) explains:

 “Total housing inventory at the end of March amounted to 1.07 million units, up 3.9% from February’s inventory . . . Unsold inventory sits at a 2.1-month supply at the current sales pace, marginally up from February’s 2.0-month supply and down from the 3.3-month supply recorded in March 2020.”

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

Even with a slight rise in the number of houses for sale this spring, inventory remains near an all-time low (See graph below):High buyer interest is creating a major imbalance between supply and demand, but as the small uptick in inventory shows, sellers are beginning to reenter the market. Selling your house now enables you to take advantage of buyer demand and get the most attention for your house – before more listings come to the market later this year.

2. Frequent Bidding Wars

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

As a result of the supply and demand imbalance, homebuyers are entering bidding wars at an accelerating rate. NAR reports the average number of bids received on the most recently closed sales is 4.8 offers. This number has doubled since the first quarter of 2020 (See graph below):As buyers face increasingly tough competition while searching for homes to purchase, they’re more likely to be flexible and generous in their negotiations. This gives a seller the opportunity to choose the best buyer for their needs and be selective about things like time to close, contingencies, renovations, and more. Working with your trusted agent is the best way to determine how to navigate the negotiation process when selling your house.

3. Days on the Market

In today’s market, sellers aren’t waiting very long to find a buyer for their house, either. NAR reports:

Properties typically remained on the market for 18 days in March, down from 20 days in February and from 29 days in March 2020. 83% of the homes sold in March 2021 were on the market for less than a month.” (See graph below):

3 Graphs Showing Why You Should Sell Your House Now | MyKCM

NAR Chief Economist Lawrence Yun explains:

“The sales for March would have been measurably higher, had there been more inventory…Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”

Bottom Line

If you’re thinking about moving, these three graphs clearly show that it’s a great time to sell your house. Let’s connect today so you can learn more about the opportunities in our local area.


Millennials In The Lead for Home Purchases, More Than Half Of All Home Purchase Applications


According to the CoreLogic Loan Application Database[1], prior to 2020, while millennial home purchase applications comprised less than half of all purchase applications, their share grew from 33% in 2014 to 47% in 2019, rising about 2 to 4 percentage points per year. This annual increase is consistent with the cohort of millennials reaching 33 years of age, the peak homebuying age.

But in 2020, the share of millennials in the homebuying market soared 7 percentage points in 2020, reaching 54% of all purchase applications (Figure 1). And while half of the increase is consistent with the natural growth rate seen since 2014, the additional half of the 2020 jump was likely driven by the pandemic. In other words, the increase was accelerated by record low mortgage interest rate and flexibility to work remotely.

Figure 2 shows U.S. population distribution by age, highlighting the largest demographic cohort reaching the peak age of FTHB on the left axis. The right axis of the chart, displayed by the green line, represents first-time home-purchase loan applications per 1,000 persons in 2020.

Younger millennials below 30 have yet to enter homeownership, so demand from millennials is likely to remain strong over the coming years. At the same time, more older millennials are likely to transition to repeat homebuyers. The share of millennial repeat buyer home-purchase applications was already 35% in 2020, just 4 percentage points lower than Gen X’ share.


Real Estate Core Values Are Celebrated In April | Fair Housing

This year, we celebrate the 53rd anniversary of the Fair Housing Act. This landmark law was signed into law on April 11, 1968, by President Lyndon B. Johnson.

The Fair Housing Act prohibits housing discrimination because of race, color, religion, national origin, sex, disability, and family status. The Act furthers the beliefs advocated by Dr. Martin Luther King Jr. and the other heroes of the Civil Rights Movement. For more information about your fair housing rights.