Most of us, have experienced, a variety of economies, from inflationary, to close -, approaching something, which resembles a recession.
Since we can’t predict the future (at least, not accurately), doesn’t it make sense, to be, as – informed, as possible, in order to proceed, as logically, as possible?
How these economic conditions, might, impact, important components, such as real estate/ housing, the stock market, and the performance of bonds, and bank – interest rates, is often, significant, and it is, usually, wise, to proceed, as an informed individual!
With, that in mind, this article will attempt to, briefly, consider, examine, review, and discuss, 3 specific areas, in terms of how, overall conditions, may influence them.
Economic Impacts Of Inflation And Rising Interest Rates: 3 Specific Areas
1. Real estate/ Housing: How might inflation, influence the real estate markets, in terms of pricing, availability, affordability, and whether, we witness, buyers, sellers, or neutral markets?
At present, we are experiencing, the cost of new housing, rising, quickly, largely because, the costs, related to many building supplies, especially, lumber, etc, have risen, at a pace, we have not seen before, in recent memory!
New home prices, therefore, have significantly increased, in costs/ prices, and, to – date, it has slowed the rate of sales, in these properties.
In recent times, because, mortgage rates, have remained at, and/ or, near, record – low rates, largely because, of a continued period, of the Federal Reserve Bank, maintaining, extremely low, rates, of borrowing funds!
The combination of the impacts, from the prolonged, horrific pandemic, cheap – money (creating, extremely, affordable, mortgages), and related, lifestyle changes, etc, have caused, a significant, increase in the costs of buying a house.
If/ when rates rise, how might that, impact home buying, etc? It is wise, to recognize, how a variety of economic conditions, affect many components, of our economy!
2. Stock market: For, the last few years, we have witnessed, a rising, stock market. Nearly, every index has improved, and benefited, from the prolonged low interest rates, which, mean, stocks have increased, in popularity, as an investment vehicle, largely, because, they are, the only – game – in – town.
With, interest rates, so low, alternatives, such as bonds, and bank accounts, pay, very little! The probability is, when rates rise, as they will, eventually, it will have an adverse effect on stock prices/ popularity!
3. Bonds and banks: While, low rates, translate – to, what is called, cheap – money, for those, borrowing funds, when this rise, the costs to borrow, will increase, and the rates, provided, on these types of accounts, will increase!
The more – informed, one is, the better – off, he probably becomes, especially, in changing times! Will you commit, to being, a wiser consumer, etc?