Understanding Inflation & Its Impact on the Atlanta Housing Market

Ever pondered the correlation between inflation and the Atlanta housing market? It might surprise you to know that these two elements are intricately linked, influencing each other with shifts and changes. Here, we unravel the nuances of this relationship specific to Atlanta, Georgia.

Exploring the Nexus of Housing Inflation and General Inflation in Atlanta

In the bustling and ever-growing Atlanta housing market, understanding shelter inflation is vital. This term refers to the growth rate of housing prices, derived from a comprehensive survey conducted by the Bureau of Labor Statistics (BLS). This survey gathers input from renters about their rental expenses and homeowners about potential rental values of their homes.

Similar to how general inflation tracks the price variations of everyday goods, shelter inflation zeroes in on housing costs. Recent data illustrates a downward trend in shelter inflation over the last four months (refer to the graph below), which holds significant implications for the broader economic landscape.

The relevance of this trend is substantial, given that shelter inflation constitutes roughly a third of the overall inflation, as denoted by the Consumer Price Index (CPI). Consequently, a dip in shelter inflation might indicate a potential decrease in overall inflation in the coming months, a perspective deeply relevant in Atlanta's dynamic market.

The Federal Reserve has been ardently working since early 2022 to curb inflation, which had soared to 8.9% around mid-last year. Although strides have been made, their objective is to stabilize it at a 2% mark, a goal they are gradually nearing with the latest figures hovering around 3.3%.

The Influence of Federal Funds Rate on Inflation

The Federal Reserve has actively been raising the Federal Funds Rate to dampen inflation. This rate defines the borrowing costs between banks, acting as a tool to prevent economic overheating during inflation surges.

As depicted in the graph below, the Federal Reserve elevates the Federal Funds Rate each time inflation shows an upward trend, aiming to maintain a 2% target. The recent actions by the Federal Reserve depict a commitment to managing the recent inflation spikes and steering towards their set target, potentially avoiding further rate hikes.

A Promising Horizon for Mortgage Rates in Atlanta?

So, what significance does this hold for you, especially in the Atlanta housing landscape? Though the Federal Reserve's movements don't dictate mortgage rates, they indeed wield a considerable influence. As explained by Mortgage Professional America (MPA):

"Mortgage rates and inflation maintain a somewhat indirect linkage. With a rise in inflation, mortgage rates escalate to balance the value of the US dollar, and vice versa."

Although forecasting mortgage rates' future trajectory remains elusive, the current signs of stabilizing inflation bring a sense of optimism.

Bottom Line

Whether you aspire to invest, sell, or simply stay abreast of the housing trends in Atlanta, connecting with Clareo Real Estate ensures you are well-informed and guided. Let's forge connections and navigate Atlanta's vibrant real estate terrain together.