Inflation Rate Expected to Accelerate in 2014 and 2015…How Will It Affect Real Estate Sales?

SEPTEMBER 2013 | BY LAWRENCE YUN

A 3% Inflation Rate Will Affect Sales

The most recent inflation rate has hovered around the 2% level which is a manageable rate that is  not too worrisome to consumers. Pressure though is building up and certain components of the Consumer Price Index  such as medical costs, energy, and housing costs  are  been on the rise.

The increase in these costs will most likely cause inflation to spike to the 3% percent levels and, create significant hardship for consumers. Such  likely rise in inflation to 3% level-,as is expected in 2014-2015, will also raise mortgage rates by a full point to compensate lenders for the loss in purchasing power of the money returned to them.

A 1% increase on a loan of $500,000 will increase the monthly payment by $417!  In markets such as Tenafly, Demarest, Cresskill and other Bergen County towns where higher mortgage amounts are prevalent, this could push prospective buyers to accelerate their decision making process. However if such buyers will seat on the sidelines for too long they could see their purchasing power decreased by roughly 20% .

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