Inflation is a hot topic in the news today. But what does it mean for the real estate market? In this video, San Diego Realtor Kyle Whissel will talk about how inflation affects home prices and mortgage rates, and what you can do to protect yourself from its impact.

If you are curious about how inflation affects the real estate market, you're in luck 'cause I'm going to dial you in on this video. My name is Kyle Whissel with Whissel Realty Group. And if you're anything like me, you've been seeing all the headlines in the news about inflation. Inflation's up, inflation's down. It's above expectations, below expectations. What the hell does all of this mean? Well, inflation is very, very important to the real estate market because inflation, a lot of time, directly impacts what's going to happen with mortgage rates.

So mortgage rates are directly going to impact what happens with the real estate market. So therefore, inflation's really freaking important. So let's talk about what's been going on with inflation. I don't think there's any mystery that inflation shot through the roof, right? Whether you went grocery shopping, you tried to buy a car, you tried to buy a house. Literally, everything has gotten far more expensive. Anytime you create stimulus and pump a bunch of money into the economy, people get a bunch of money. They go spend it, it drives prices up. So I think we all kind of understand what caused the inflation, but let's talk about, more specifically, over the last 90 days.

So we're looking at what happened in June, what happened in July, what happened in August and how does that affect things? 'Cause that's when it really got super volatile. So back in the beginning of June, the inflation numbers came out. And so anytime inflation numbers come out, you'll hear what's referred to as CPI, Consumer Price Index. That is the number that's typically referred to as inflation. So what happens is whenever this number's going to come out, economists make a prediction. Where do they think that number's going to come in? So the economists came in with the number that they expected, and when the final number got released, it was far higher than what the economist expected.

And so when that happens, the government steps in and utilizes what's referred to as the Federal Funds Rate to help kind of control spending in this economy because the theory is if we can raise the rates on what it costs to borrow money, people will borrow less money, and therefore, they will spend less money. When they spend less money, inflation comes back down. So when the number came in much higher than expected, the Fed came in and said, "Okay, hey, we're going to have to raise rates." So they did to try to curb the inflation. Well, guess what?

They raised rates, but inflation still went up in July. And so what'd the Fed do? The Fed said, "All right, we've got to come and we've got to raise rates again," which they did. And they made some of the largest raises we've ever seen in history. Well, when the rate on the Federal Funds Rate raises, a lot of times, that is the rate that banks borrow money at when they borrow from the Fed. Well, if the banks have to spend more money to borrow, guess what they do? They pass that added expense in to consumers. So whether it's your credit card, you're buying a car, you're buying a house. Rates tend to all go up when the Federal Funds Rate goes up. So they're not directly correlated.

We can do a whole nother video about that. But anytime Federal Funds Rate goes up, mortgage rates tend to go with it. Not at the same time, they actually go up before the Federal Funds Rate. But we know that when those go up, mortgage rates go up. That tends to have a big impact on the real estate market. Typically, when we saw, we see rates go up 1%, we see affordability go down about 10%. Well rates went up about 3% in June and July from where they were previously. Well, when rates go up 3%, that eliminates 30% of affordability, which knocks a lot of buyers out of the game.

So we've saw a lot of buyers in June and July get out of the game because they just couldn't afford it anymore with these new rates. Well, come August, here's what happens in August, is the expectation is that inflation's finally going to come down a little bit and it's going to come in here. Well, they finally announced the numbers. Not only did it come in here, it came in down here. It actually came in far lower than what was expected. So in June, we had the opposite expectation, and here's where it came in. In August, here's expectation. Here's where it came in. So now, we're starting to see rates start to pull back a little bit because the mortgage rates tend to follow the inflation rates.

So now you got inflation coming down faster than expected. You're starting to see mortgage rates come down more than expected. And when mortgage rates come down more than expected, that's going to get a lot of those buyers who were previously knocked out, it's going to get them back in the game and it's going to start to pick up some steam in that real estate market. So if you're watching this and you're wondering like, well, what should I be doing? If you've been thinking about buying, think you should buy right now. I'm not saying that just cause I'm a a realtor. I'm telling you for your sake. I think there's this little dip right now.

There's a small little opportunity to capitalize before this really catches on and becomes a trend before we pick up steam in the other direction as rates get lower. I think there's a good opportunity for you to cash in right now on the fact that everybody's on the sidelines, they're all checked out, but as they start to come back in, I think you're going to see rates or we've seen values declining. Think we're going to level off and we're going to start to come back up again in the next six months.

So that's what's been going on in with inflation. And I think inflation's going to continue to get lower and lower, rates are going to get lower and lower, buyers are going to get back in the game. Values are going to go back up. So take advantage of it while you can. If you do want to take advantage of it, give us a call, shoot us a text at the number down below. That'll get you dialed in with my team. I want to thank you so much for watching this video. Kyle Whissel with Whissel Realty.

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