What Rising Inflation Means for Your Move

Higher Inflation Is Affecting Mortgage Rates. Here's What That Means Locally.

If you've been following economic news lately, you've probably seen headlines about inflation moving higher again.

For sellers and buyers in Tallahassee, that raises an important question:

Will this affect mortgage rates and the housing market?

The short answer is yes. But probably not in the dramatic way some headlines suggest.

Let's look at what's happening and what it means if you're planning a move in the Tallahassee area.

Inflation Is Moving Higher Again

One of the Federal Reserve's preferred measures of inflation is called the Personal Consumption Expenditures Price Index, or PCE. Recently, that number has moved noticeably higher.

While inflation is rising, there's an important detail buried in the data. The biggest increase has come from energy-related costs, largely driven by global events and higher oil prices. Core inflation, which removes food and energy costs, has risen more slowly.

That's important because it suggests part of today's inflation pressure may be temporary if energy markets eventually stabilize.

Why Inflation Matters to Mortgage Rates

Inflation and mortgage rates aren't the same thing, but they're closely connected. When inflation remains elevated, the Federal Reserve is generally less likely to cut interest rates and may even consider raising them.

As of early June, financial markets viewed the possibility of another Federal Funds Rate increase as nearly a coin flip.

That uncertainty is one reason mortgage rates have remained stubbornly elevated.

For buyers waiting for rates to suddenly fall into the 5% range, recent inflation data suggests that may not happen anytime soon.

What We're Seeing in Tallahassee

While national headlines focus heavily on mortgage rates, local market conditions are equally important. One thing many buyers don't realize is that Tallahassee offers considerably more inventory today than it did during the pandemic-era housing frenzy.

As of mid-June, buyers can choose from:

• 1,723 active residential listings
• 584 homes priced below $250,000
• 765 homes priced below $300,000
• 926 homes priced below $350,000
• 303 active townhomes and condominiums
• 120 active new construction homes

That's giving buyers more opportunities to negotiate and more time to evaluate their options.

A few years ago, many buyers faced intense competition and multiple-offer situations on nearly every property. Today's market is much more balanced.

Affordability Is Still a Challenge, But There Are Options

Higher mortgage rates have undoubtedly impacted affordability.

During the first two weeks of June:

• Median residential sales price: $321,000
• Median new construction sales price: $364,900
• Median condo and townhome sales price: $242,500

Those condo and townhome prices are especially noteworthy. For many first-time buyers, townhomes and condos are creating an affordable path to homeownership that simply didn't exist when inventory was much tighter.

Likewise, buyers who are open to homes needing cosmetic updates often find opportunities in the $200,000 to $250,000 entry-level segment of the market.

New Construction May Offer More Flexibility

Another bright spot is Tallahassee's new construction market. With 120 active new construction homes available, builders are competing for buyers.

That can create opportunities for:

• Closing cost assistance
• Interest-rate buydowns
• Appliance packages
• Upgrade allowances
• Other builder incentives

Communities such as Canopy and Southwood and newer developments throughout the Tallahassee area continue to provide options for buyers seeking modern floorplans and move-in-ready homes.

This Is Not a Housing Crash

Whenever inflation rises, housing crash predictions inevitably start circulating online. The facts don't support that narrative.

Today's market looks dramatically different from the conditions that led to the 2008 housing crisis. Most homeowners have substantial equity, lending standards remain far stricter, and inventory levels are nowhere near the oversupply conditions that existed before the last crash.

The challenge today is affordability, not widespread financial distress. That's an important distinction.

What Buyers Can Do Right Now

If you're waiting for rates to fall significantly, it may be worth having a conversation with a lender before putting your plans on hold.

Options that may help include:

• Temporary interest-rate buydowns
• Adjustable-rate mortgages (ARMs)
• Down payment assistance programs
• Seller-paid closing costs
• Tallahassee Lenders Consortium assistance programs

Combined with today's larger inventory selection, these tools can make homeownership more attainable than many buyers realize.

We also host Homebuyer Workshop where we discuss financing options, local assistance programs, and strategies for buying in today's market.

Bottom Line

Rising inflation could keep mortgage rates elevated longer than many economists originally expected. But higher rates don't mean the Tallahassee housing market is frozen.

Buyers currently have more inventory, more negotiating power, and more options than they've had in years. Sellers continue to benefit from a market supported by limited inventory and steady demand.

The key isn't trying to perfectly predict what inflation or mortgage rates will do next. It's understanding your options and creating a strategy that works in today's market.