Inflation Climbs: What Rising Prices Mean for Your Real Estate Decisions

It was a relatively quiet week for mortgage markets, but the latest inflation data came in a bit stronger than expected. This led to a modest increase in mortgage rates, which ended the week slightly higher.

Inflation Pressures Remain Stubborn

The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures price index, showed an annual increase of 2.8 percent for core prices in February. This was slightly above expectations and up from the 2.7 percent reading last month. While the rate has come down significantly from its peak, the Fed’s goal of returning inflation to 2.0 percent remains difficult to achieve. For real estate, upward pressure on inflation makes it more likely that mortgage rates will stay elevated, which could impact affordability. Buyers may want to act before further rate increases, while sellers should stay aware of how rising borrowing costs affect demand.

Existing Home Sales Beat Expectations

In February, existing home sales rose 4 percent from January, defying expectations for a slight decline. While sales were still a bit lower than a year ago, the market showed solid momentum. The median existing home price hit $398,400, up 4 percent from the same time last year and marking a record high for February. Inventory remains tight at a 3.5 month supply, far below the six month level typically seen in a balanced market, although it has increased 17 percent year over year. For buyers, growing inventory offers some relief, but rising prices and mortgage rates can still present challenges. Sellers may continue to benefit from low competition, though strategic pricing will remain important as buyers become more rate sensitive.

Home Building Rebounds Strongly After January Slowdown

After a weather-related slump in January, housing starts rebounded sharply in February, jumping 11 percent month over month. Gains were seen across both single family and multi family sectors. Single family building permits, which serve as a forward-looking indicator, held steady and were in line with forecasts. The supply of new homes available for sale stayed near its highest point since 2007. However, a survey from the National Association of Home Builders showed that builder sentiment dropped to a seven month low, with concerns about tariffs and rising material costs weighing on outlook. For real estate, a recovery in new construction helps address long-standing inventory shortages, which could improve buyer options. However, uncertainty among builders may slow the pace of new projects, especially if costs continue to rise. Buyers and sellers alike should keep an eye on how new home supply affects their local markets.

What This Means for Real Estate

The week’s data highlights the delicate balance between inflation, interest rates, and housing supply. For buyers, locking in a mortgage before further rate increases could be a smart move, especially with inventory gradually improving. Sellers may still find strong demand, but staying competitive on price will be key as buyers become more sensitive to rising costs.

Staying up to date on market trends and inflation developments is essential to navigating your real estate goals with confidence. Whether you are buying or selling, informed timing and strategy are more important than ever.