Recent years have brought a host of unexpected problems and have forced most industries to adapt to rapid change. One of the most obvious, and impactful, shifts has been in the housing market. As inflation has reduced purchasing power and mortgage interest rates have been far less consistent, more people have been staying home.
However, inflation has not stopped homes from selling. How does this happen? In order to understand why homes will continue to sell in spite of inflation, and why now is not considered a bad time to buy, you must first understand what’s behind the rising inflation and what people are looking at when they choose their homes. Here’s what you need to know.
What Is Causing Inflation?
Inflation is the buzzword these days, with economists and business analysts belaboring the point that your money doesn’t go as far as it used to. Inflation refers to when the prices of goods and services are rising but buying power is not keeping up. In other words, your dollars are worth less than they were before. If you have $20 and you want to buy a pizza for $20, that’s doable. But if that pizza goes up to $40, you still have $20, it just doesn’t get you that pizza anymore. That’s inflation.
The causes behind inflation are complex, nuanced and often overlapping. The economy has seen a drop in workers due to mass unemployment during COVID and the mismatch between employees’ wage needs and business offerings. Oil and gas prices are rising worldwide, and the supply chain (that gets products to and from where they need to go) is often broken or clogged in certain sectors, delaying the smooth supply of items.
In addition, key raw materials are sparse, and the raw materials themselves are more costly as a result. This particular element plays an important role in why homes continue to sell, even when buying power is down.
Why Inflation Doesn’t Impact Home Sales as Much as You Think
Why would people buy or sell homes when they’re more expensive than they were a few years ago due to inflation? There are numerous reasons:
1. Inflation doesn’t usually completely reverse: When prices go up, they very rarely return to exactly where they were. Home buyers know that if they want to wait until they start to see prices that they were seeing two or three years ago, they could be waiting forever.
2. Changes in behaviors spark space needs: The pandemic showed people just how valuable their living space is and made them want more of it. This has driven up competition for homes from families who want to upgrade.
3. Raw materials are in short supply: As mentioned previously, raw materials are expensive and difficult to obtain right now. This severely undercuts the new construction market, meaning that existing homes are selling fast because people who previously may have otherwise built a new home are not currently able to.
4. Sellers benefit from the market: Because prices have risen over the last few years, many sellers are eager to part with their homes to capitalize on high prices. This allows them to downsize and keep a lot of the equity they have earned as cash.
Why Title Insurance Is Key to Securing Your Investment
If you need a home, the market continues to thrive and the current inflation is no reason to wait. However, as home prices go up, it is more critical than ever to protect your purchase and secure your financial future against unexpected expenses. Title insurance is key to securing your investment in a home.
This type of coverage protects you from unanticipated problems, such as fraud, buying a home that the seller didn’t have the authority to sell, or finding out that there are liens on the property after you’ve already signed the papers at closing.
These issues can cost you significant time and money or even threaten your right to own and live in your new home. Title insurance shields you against these problems, and some policies even come with legal professionals who will represent you in court if necessary.
Work with the Pros to Choose the Right Coverage for You
Inflation can make everything seem overwhelming, but knowing that your new home is protected with robust title insurance is one of the easiest steps you can take to ease your mind about your new investment. The experts at Mathis Title Company can help you choose the right type of coverage for your needs. Contact Mathis Title Company to learn more or to schedule an appointment to get started.