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.

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.

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

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

1) Interest Rates Hikes

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

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.

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

2) Slowdown in Demand

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.