CHARLESTON, S.C. (WCBD)- With interest rates expected to rise again, South Carolinians already struggling to deal with sky-high inflation are likely to see little economic relief in the coming months.
According to the U.S. Bureau of Labor Statistics, wholesale inflation jumped 8.7% in August–a slight slowdown from July–but a sign that spiking consumer prices are sticking around.
“You see about a 10% annualized increase in medical care, a 10% increase in rent, a 10% annual increase in cars, and a 10% increase in food,” College of Charleston Economics Professor Mark Witte said.
The Federal Reserve Board is set to meet next week and economists predict that the Fed will respond to the August report with another interest rate hike.
‘Inflation is typically created when you have too much money chasing too few goods and the way that the federal reserve takes money out of the financial system is by making it difficult for consumers and businesses to borrow,” Witte said.
Witte said the Fed is expected to raise interest rates 0.75 percent, a figure higher than has been seen in recent years, but similar to rates in the 1990s.
“This might be a return to normalcy that existed before the recession,” he said.
But, it is not great news for individuals with credit card debt or who are looking to buy a house.
“I anticipate what we’re going to see is higher mortgage rates in the near term perhaps in the next three months to six months,” Witte said.
That trend is already happening. The average long-term U.S. mortgage rate jumped to over 6% this week, the highest since November 2008 during the housing market crash.
While the demand has not subsided, realtors say uncertainty in the market coupled with a historically low number of listings in the Tri-County area is impacting sales.
“We’re only at 2,236 [single-family home listings],” Incoming President for the SC Realtors Association Rob Woodul said. “In a more healthy market, we’d be closer to 10,000 units so we’re short about 8,000 homes.”
Local realtors are paying close attention to these trends, especially when it comes to non-cash home buyers.
“We’re running about 27 to 28 percent of our buyers right now are cash buyers,” Woodul said. “One of the things we’re saying is ‘look we know the rates are high historically it’s really, really low.'”
The average price for a single-family home in the Tri-County last month was $553,775, a 15% increase from the previous year. In Charleston County alone, that figure is even higher with an average sales price of $819,894.
“The affordability piece is the concerning piece,” Woodul said. “Driving prices continue to go up and first-time homebuyers are having to drive to where they qualify so that may be further out which then compounds the problem of traffic and roads and bridges and all those things that we see.”
Despite higher sales prices than in previous years, asking prices have come down in the Charleston area–about 30% of sellers dropped their asking price in July according to Redfin.
“We’re seeing price corrections,” Woodul said. “Now that the market is starting to normalize, people aren’t going to pay an over-asking price because they’re coming back down to what the market will bear and what the house will appraise for.”
Woodul emphasized the importance for homebuyers to consider the uncertainty in the housing market when considering the investment.
“No one has a crystal ball on when they can come back and refinance at a lower rate when interest rates come back down,” he said.
Varying interest rates are why Witte recommends consumers make efforts to diminish debt while they can.
“If they do have outstanding debt, whether that be student loans or credit card debt or anything with variable interest rates, they should make whatever effort they can to pay down that debt.”