At the time of writing, the holiday season is fast approaching. There’s one gift that seems to keep on giving: inflation! As we wrap up the year, we’ve been looking at the numbers, and the story they tell is that we are still in for the long haul when it comes to pain and fear in the market. 

Not the happiest of sentiments as we try to put find our Christmas cheer, but it’s crucial that we accept and understand the reality behind current market conditions for what it is so we can make better financial decisions for ourselves and our clients.

With that said, here’s the latest in the market and what moves we can make! 

The Current Reality of Inflation

When the government and the Federal Reserve injected a large amount of money into the economy to save it, they essentially increased the amount of money in the market, leading to inflation and causing prices to rise. 

People who didn’t adjust or get a pay raise were essentially taxed. Even now, if you were only to get a 5% pay raise, you would still be losing 2.1% of your buying power to inflation. With inflation rearing its ugly head, people have been on the edge of their seats waiting for good news from the Fed and the latest market readings like the PCE and CPI. 

When we received the latest consumer price index (CPI), the readings came in lower than expected. The CPI is a widely recognized gauge of inflation and is used to determine whether prices, in general, are rising or falling in the United States. It's calculated by selecting items that represent different categories and assigning different weights to them, resulting in a single number that reflects the overall change in prices. 

While this may sound good on the surface, the reality is that even though inflation isn’t happening at the pace we thought it would, it’s still happening. This is an issue because inflation hasn't been a significant source of worry for a long time. Since the 80s, we really didn’t worry about the I-word. Now that we’re experiencing it, many generations were unprepared for the effects. This means that fear is still a major motivator in the market.

Opportunities in the Housing Market

How is inflation related to the housing market? Well, we know that the Fed has decided it wants to raise interest rates to force down spending. As a result, people are stuck trying to figure out which monster to battle, high rates or high prices. 

Here’s our advice as mortgage lenders, waiting to time the bottom is not the answer. No one should time the market; that’s just a general rule. But when it comes to housing, if you wait for interest rates to drop too low, you’re opening yourself up to a frenzy of potential buyers, which will drive prices up. 

Based on the latest statistics, there are approximately 25 million people of the millennial generation alone that are primed to become homeowners. That means you’re, by far, not the only one looking to find the right time to buy. 

The best course of action is to find the best rates possible. This will lead to better negotiation. Finding a way to get the best rate possible NOW (or even when rates start dropping a little) will give you the best long-term deal. 

The reality you have to consider is that when we were at the bottom of housing prices and interest rates, the only way we could go was up. Now we are at our peak; the next point of trajectory is down. When? No one knows, but waiting for it to happen could lead to a huge missed opportunity. 

Final Thoughts

It's crucial to keep an eye on inflation and its potential effects on the economy and personal finances. While it may be frustrating to deal with, we need to recognize that it's a reality and there are steps we can take to protect against its impacts. 

This might involve adjusting spending habits, looking for investments that are less sensitive to inflation, or finding ways to increase income. Stay informed with the latest market information. Wise financial leaders don’t just save money; they find opportunities even in the worst circumstances.