Page 12 - July 2022 Issue.indd

DOLLARS AND SENSE by Tolbert Rowe

Infl ation...Recession

Like a drug addict going through increase in long term mortgage rates, increase in mortgage rates that we have
withdrawl from $5 trillion of fiscal that the Fed does not control. seen in decades. Rarely, if ever have we
stimulus over the last year and a half, the seen interest rates double so quickly and
American consumer is having to adjust With over eleven million jobs unfi lled, it will certainly have an impact on the
to a new and exciting phenomenon, which is almost two available jobs for real estate market.
inflation. Not just a little more in cost every unemployed person, and demand

of things we consume, historically for rental and owner-occupied housing Active listings in Caroline County are
higher costs of things we consume. Th e far exceeding the supply of available the same as they were three months ago
American consumers’ addiction to fi scal housing units, the Fed has moved into at 59 currently active or coming soon.

stimulus and low interest rates over the panic mode. The .50% increase in May And of the 125 sales in the last 90 days,
last several years has been like cocaine was not enough so they have moved 51, or 40%, sold at prices higher than
to a junkie. rates .75% in June, and if inflation the listing price. A higher percentage
continues at historically high rates, they than either Talbot (30%) or Dorchester
Consumer prices increased 8.6% in May will continue with noticeable increases Counties (27%). Houses that have sold
which is the third straight month of in excess of .50%. in the last 90 days went under contract
greater than 8.3% increases in year over as much as 120 to 150 days ago.
By failing to be proactive and move rates

year inflation. Gasoline at $5 per gallon
up as the inflationary impacts of $5 Although the inventory of houses for
and climbing is forcing families to have
trillion of stimulus monies began to take sale is about the same in Caroline, it is up
an intervention to determine what and if

hold in the last six months of 2021, Fed is significantly in Talbot and Dorchester

vacations can be afforded this year. If this
now in a position of having to do damage from where it was three months ago. As
level of inflation continues, consumer

control. Had they been proactive and rates continue to climb, homeowners are
spending will certainly slow down and

realized that inflationary pressures in reluctant to sell their home unless the
since consumer spending accounts for
2021 were not “transitory”, or temporary proceeds of the sale will be suffi cient for
2/3rds of all spending, many economists
as they indicated, we would not be the them to pay cash for their next purchase,
are predicting a recession as soon as the
situation we are in right now. or they must borrow an extremely low
end of this year or early next year.
amount. This is one of the reasons that

By taking baby steps and nudging rates

The Federal Reserve, acting like a rehab up slowly they could have avoided the number of homes selling for cash has
counselor, is trying to wean the American having to take a sledgehammer to pound increased from 26% to 28% according to
consumer off the trillions in stimulus down inflationary pressures this year. Case Shiller. Sellers become buyers who

money and historically low interest But hindsight is always 20/20. are not affected by higher interest rates.

rates that has given everyone a jolt to Those unable to sell their existing home

their personal budget. By increasing The recent increase in mortgage rates and purchase the next for cash are doing

short term interest rates, that the Fed from the 3% range six months ago to the math and realizing higher prices
can control, there is a corresponding nearly 6% today is the fastest six month
are great for a seller but not so great for
a buyer. Borrowing $100,000 at 5.5%
yields the same payment, ($565) that
“Your Mortgage Consultant Since 1985” they would have if they owed $135,000
at 3%. ($567). Higher interest rates are
Purchase or Refinance cutting the amount one can borrow
by about a third for the same monthly

payment. This is also the reason many
buyers are putting their quest for a new
home on hold.
The real estate market on the Eastern

115 E Dover St. Ste 3 - Easton, MD
Shore, and more specifi cally Caroline
tolbert@baycapitalmortgage.com C. Tolbert Rowe, County, is being impacted by factors
www.baycapitalmortgage.com NMLS Vice President/Lending last seen 20 years ago, back to the days
182844
of “drive till you qualify”.
410-819-3005 / cell 410-310-3520
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