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Mortgage:
Housing Prices During Recessions In Canada
 Housing prices during recessions in Canada have shown a very strange trend. This trend is unlike what we see in other countries. Although during recessions in Canada fewer homes are sold, home prices tend to go up; as is the case presently seen in Toronto. More..
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Effects Of Inflation On House Prices
In any country inflation is not viewed favorably because of the serious effects it has on the economy and other social things like house prices, income and retirement benefits. Inflation has a serious and adverse effect on income distribution wherein the fixed income is not adjusted to continuous price rise which happens during inflation. In addition, the real income, that is the income that buys goods and services, falls. |
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Like all home buyers, you too would want to know the effects of inflation on house prices considering that the US is facing recession and automatically this gives rise to inflation. First of all it is important to understand that home prices are based on supply and demand. The price increases when the demand is more and decreases when the supply is more than the demand.
When there is inflation, people are prone to save money as they do not want to spend it. This means that the supply for homes increases but the demand decreases. This results in house prices falling and the actual value of a home decreases because of inflation. Usually when there is inflation, it is not considered to be a seller’s market. Instead, inflation tends to favor the buyer who can get a home for half its value at times.
During inflation, the US Central Reserve increases the interest rates to. This means that it becomes more expensive for a home buyer to take out a mortgage. The reason behind this is very simple. Lenders know that inflation will erode the value of their money over the term of the loan so they increase the interest rate to compensate for that loss. This also has an effect on house prices as borrowers are hesitant to take out a mortgage on high interest rates and it causes a glut of homes in the real estate market.
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