5 Reasons Why Rising Inflation Is Stoking a Housing Market Crash

Inflation has been a word on many people’s tongues since the end of 2021.

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It’s a worry to many different people for various reasons — from individuals who are worried they won’t be able to afford their groceries after price hikes to business owners concerned about covering their overhead costs.

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However, one of the significant consequences of rising inflation is the potential for housing prices to rise, possibly causing a housing market crisis.

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Let’s take a closer look at the trends that have been brewing over recent times.

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1) Interest Rates Hikes

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The association between interest rates and inflation is well known. When inflation runs wild, the Fed raises interest rates to slow the economy down.

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How? Higher interest rates make it more profitable to save and more expensive to borrow, encouraging people to refrain from spending too much — reducing demand and therefore getting inflation under control.

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Mortgage rates increase along with other rates, making it more expensive and less desirable to take out a mortgage.

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2) Slowdown in Demand

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The same phenomenon played out in many different real estate markets across the world in 2021: High numbers of homebuyers scrambling over the same limited housing stock.

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