Could Rising Inflation Be Stoking a Housing Market Crash?

One of the significant consequences of rising inflation is the potential for housing prices to leap, possibly causing a housing market crisis. 

Since growing prices are the literal definition of inflation, it seems reasonable to assume properties will follow this general pattern — especially after house prices rose by almost 20% in 2021.

However, things are rarely clear-cut, and a crash could be brewing instead. 

Interest Rates Hike

The association between interest rates and inflation is well known. When inflation runs wild, the Fed raises interest rates to slow the economy down. 

How? Higher interest rates make it more profitable to save and more expensive to borrow, encouraging people to refrain from spending too much — reducing demand and therefore getting inflation under control. 

Mortgage rates increase along with other rates, making it more expensive and less desirable to take out a mortgage. 

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