Rising inflation is pressing on Americans across the economic spectrum with costs for groceries to gasoline increasing. In November, consumer prices increased by 6.8% compared to a year ago, the largest annual gain in the past 40 years.

Some of the highest increases occurred for energy, shelter, cars, and food, which comprise about 61% of consumer purchases and account for 81% of inflation over the past 12 months, MarketWatch reports.

Renters may be feeling the impact. Rents are up 3% and accelerating at about 5% annually, says Lawrence Yun, chief economist of the National Association of REALTORS®.

Also, heating bills are increasing; natural gas prices have jumped by 25%.

Yun also warns that the increase in inflation is a primary reason that mortgage rates will likely rise in 2022. The 30-year fixed-rate mortgage is predicted to reach 3.7% by the end of 2022. Rates averaged 3.10% last week, according to Freddie Mac.

“One aspect of inflation is that real estate has proven to be a good hedge,” Yun says.

As he explains in a recent statement:

“In the 1970s, a high inflationary period when [the Consumer Price Index] averaged 7.1% per year, home price gains outpaced inflation with a 9.9% gain. Even when interest rates soared in the 1980s and thereby crushed home sales, home prices still held up to consumer price inflation: 5.5% versus 5.6%. That’s because rents are soaring. Other decades also show similar patterns. Therefore, for those concerned about the loss in purchasing power of money and savings, be assured that real estate has proven to be a good hedge against inflation.”

Women are second only to married couples as a homebuying presence in the real estate market, according to the National Association of REALTORS®. Currently, 19% of the homebuying market are single women, while 9% are single men and 60% are married couples, according to NAR.

Single women and single men show a high desire to own a home of their own, but single women outnumber men by about a 2-1 ratio. While a roughly equivalent percentage of men and women purchase because of the desire to own a home, the number of women who purchase a home to be near their friends and family is double that of men, NAR says.

Single women buyers also are more likely to purchase a home if they have a child under the age of 18, and they’re more likely to purchase a multigenerational home to accommodate adult siblings, adult children, and grandparents.

“These family obligations may make purchasing a home more attractive to a single woman buyer as she has the need for stable housing on a continual basis,” Jessica Lautz, NAR’s vice president of demographics and behavioral insights, writes at the association’s blog.

Seventeen percent of single women buyers say they have kids under the age of 18 who live with them, and 13% say they live in a multigenerational home, according to NAR’s Profile of Home Buyers and Sellers.

As the number of single women buyers rises, the share of married couples in the real estate market has been dropping. Lautz cites data that shows in 1990, 59% of Americans were married; that percentage has dropped to 52% more recently.

For the last four consecutive weeks, mortgage rates have generally held stable. But that could soon change, with inflation, action from the Federal Reserve possibly quickening its pace to taper its bond purchases, and other financial activity triggered by the ongoing pandemic all playing a role, economists say.

“Mortgage rates have moved sideways over the last several weeks, fluctuating within a narrow range,” says Sam Khater, Freddie Mac’s chief economist. “Going forward, the path that rates take will be directly impacted by more information about the omicron variant as it is revealed and the trajectory of the pandemic. In the meantime, rates remain low and stable, even as the nation faces declining housing affordability and low inventory.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 9:

• 30-year fixed-rate mortgages: averaged 3.10%, with an average 0.7 point, dropping from last week’s 3.11% average. Last year at this time, 30-year rates averaged 2.71%.
• 15-year fixed-rate mortgages: averaged 2.38%, with an average 0.7 point, falling from last week’s 2.39% average. A year ago, 15-year rates averaged 2.26%.
• 5-year hybrid adjustable-rate mortgages: averaged 2.45%, with an average 0.3 point, falling from last week’s 2.49% average. A year ago, 5-year ARMs averaged 2.79%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront cost of obtaining the mortgage.

Homeowners continue to build wealth. Home price growth is reaching the highest level in more than four decades, pushing equity gains to a record high.

The average home equity gained between the third quarter of 2020 and the third quarter of 2021 is about $57,000, CoreLogic reports.

“Not only have equity gains helped homeowners more seamlessly transition out of forbearance and avoid a distressed sale, but they’ve also enabled many to continue building their wealth,” says Frank Martell, president and CEO of CoreLogic.

Overall, homeowners with mortgages have seen their equity increase by a total of $3.2 trillion since the third quarter of 2020—a jump of 31.1% year over year, CoreLogic reports.

California, Hawaii, and Washington posted the largest equity gains in the third quarter year over year, up $118,700, $112,700, and $96,000, respectively, CoreLogic reports. On the other hand, North Dakota posted the lowest average equity increases at $15,400.

Meanwhile, the number of homeowners with negative equity—where the mortgage on the property is higher than what the property is currently worth—continues to fall. Negative equity decreased by 5.7% when comparing the second quarter to the third quarter. About 1.2 million homes—or 2.1% of all properties with a mortgage—are in a negative equity position, CoreLogic reports.

Mortgage rates play a big role in borrowers’ buying power. Super low rates over the past year have allowed many home buyers to stretch their housing budgets, important as they have faced high home price increases.

But many economists are predicting higher rates over the next few months. What can home buyers expect for 2022?

While the trajectory of rates is never simple to predict, particularly due to the ongoing pandemic, Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, told Yahoo that she believes mortgage rates are poised to rise slowly in 2022..

Omicron Variant Threatens More Disruption in Real Estate

“Inflation rose to its highest since 1990,” Evangelou told Yahoo. “When inflation rises, lenders ask for higher interest rates as compensation for the decrease in purchasing power. Thus, if inflation remains elevated for a longer period, that will drift up mortgage rates.”

She expects the Fed to raise interest rates in the first half of 2022 to try to manage inflation.

Evangelou also says higher mortgage rates are on the horizon as the Fed tapers its monthly bond purchases. Mortgage rates often follow the 10-year Treasury yield and, with those expected to rise, mortgage rates are expected to follow.

Evangelou expects the 30-year fixed-rate mortgage to average 3.3% in the first quarter of 2022, rising to 3.5% for the year.

For comparison, the 30-year fixed-rate mortgage averaged 3.11% for the week ending Dec. 2, Freddie Mac reports. Mortgage rates the last few weeks have been moving higher from their sub-3% lows earlier in the year.

Evangelou says that despite the jump in 2022, rates will still not be high: “Consumers shouldn’t panic,” she says. “Even with this increase, mortgage rates will be slow.”

With Americans spending more time at home during the pandemic, their motivation to move has increased, finds a survey from StorageUnits.com, a storage facility firm.

Thirty-seven percent of about 1,250 Americans recently surveyed said they moved into homes with more square footage between March 2020 and October 2021. Thirty-nine percent of Americans say their move was motivated by being able to work remotely, according to the survey.

“The clients I worked with who relocated had various reasons for their moves, but they all came back to one thing—the pandemic changed everyone’s lives,” Rogers Healy, owner and CEO of Rogers Healy & Associates Real Estate, told StorageUnits. “As people realized this was going to be the new normal, it became necessary to find permanent fixes. For many people, the home that once fulfilled their needs no longer worked for the new 24/7 stay-at-home lifestyle.”

Seventy-six percent of Americans between the ages of 18 to 34 changed residences between March 2020 and October 2021; 69% of Americans between the ages of 35 to 54 did, the survey finds. For the younger age bracket, in particular, the attraction of a larger home was a top factor.

New-home sizes are getting bigger as builders see increasing homebuyer interest. As of the third quarter, the median single-family square floor area has increased to 2,337 square feet while the average (mean) square footage of new single-family homes rose to 2,541, according to the latest Census Bureau data, as reported by the National Association of Home Builders. The average size of new single-family homes is 6.2% bigger since the lows reached during the Great Recession.

Remote work has been a big driver of real estate moves, real estate professionals report. “With multiple people in the home working remotely and learning virtually, many families found a need for more private spaces,” Lisa Lewis, a real estate professional with Ebby Halliday, REALTORS®, told StorageUnits. “Open concept homes do not provide the separation of needed workspace. At the same time, people were longing for more elbow room.”

Households found they needed larger homes to accommodate office and classroom space, and remote workers sought more room at home to spread out.