Inflation is cooling. What does that mean for the housing market?

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How will an inflation cooldown impact housing?

Housing costs have been a key component of the increases in inflation rates in the U.S. for the past 18 months. However, recent data may show that inflationary trends aren’t as big of an issue for housing as it once was.

According to a recent report from the National Association of Realtors, the median home price in the U.S. was $393,300 in April 2023. This is down from $401,700 in April 2022, and shows a 2% decrease year-over-year.

According to experts, affordability trends in the coming months will largely depend on mortgage rates. First American chief economist Mark Fleming wrote, “housing supply remains so restricted, that any uptick in demand will put upward pressure on prices. This is the dynamic that played out in March, as the spring home-buying season ushered in more demand for homes, while insufficient supply prompted buyers to compete and bid up prices.”

Experts also indicated that while housing inventory is likely to remain low throughout the year, it should trend upwards into Q4 2023. Bright MLS chief economist Lisa Sturtevant claims, “some people have to move, and others will decide to move for a bigger or smaller home, or to change jobs or neighborhoods, despite rates remaining elevated.”

While we won’t be back to pre-pandemic levels for a while, the market should begin to soften in the second half of 2023.

What are experts saying about mortgage rates?

CBS news spoke with a few experts to better understand what the future holds for mortgage rates. The overwhelming takeaway is that most experts aren’t sure what the long-term trends are and mortgage rates will depend on how the Federal Reserve handles interest rates for the rest of the year.

Peter Idziak, a senior associate at Polunsky Bietel Green, stated, “The Fed has recently signaled that it may forego a rate increase at its next meeting while it evaluates the effect its recent increases have had on inflation, but the market still expects the Fed to continue raising rates later this year. However, if the Fed stops raising because the data shows the economy weakening and inflation coming down further, then I would expect mortgage rates to decrease during the second half of 2023.”

Do trees help or hurt the sale of a home? detailed the pros and cons of buying a home that has trees in the yard. On one side, trees add shade to a property, can boost mental or physical health, and can increase privacy. On the downside, they can impact allergies, cause conflict with neighbors, and potentially cause foundation issues or gutter damage.

If you have your eye on a property that has trees, you may want to have them checked out during the discovery process. Checking on roots or property lines before agreeing to a sale could prevent a headache down the road.

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