Record inflation is being seen across most sectors and industries within the U.S., and the housing market is feeling the impacts heavily. The average 30-year fixed-rate mortgage in the U.S. just hit record highs of $453,000, with average interest rates growing from 3.83% to 4.05%, reports CNBC.
Shelter contributes to about a third of the consumer price index (CPI), which measures inflation, and constitutes roughly 40% of core CPI. Skyrocketing prices in mortgages and rents only seek to exacerbate and elevate inflationary pressures, while conversely affecting the number of homebuyers and those looking to refinance. As of now, this year has seen less than half of the number of applications for home refinancing filed than last year did, and mortgage demand continues to fall.
It’s another case of demand far outweighing supply, creating an environment of steadily increasing housing prices that saw a brief respite last summer before continuing their upward momentum. A report from CoreLogic found that housing prices in the U.S. were up 18.5% year-over-year from December 2020 to December 2021.
Inflation continues to be a complex and intertwining issue impacting all corners of the economy within the U.S. as inflation percentages continue climbing.
“Mortgage rates increased across the board last week following the recent rise in Treasury yields, which have moved higher due to unrelenting inflationary pressures and increased market expectations of more aggressive policy moves by the Federal Reserve,” said Joel Kan, MBA economist.
Hedging Against Inflation With International Real Estate
Inflation has risen globally, but many countries are experiencing a leveling off, or even a decline in pandemic-exacerbated inflation. For investors looking to hedge against inflation through real estate investment, the WisdomTree Global ex-US Real Estate Fund (DRW) offers exposure to countries outside of the U.S.
The fund seeks to track investment results of companies within the real estate sector in both developed and emerging equity markets that are dividend-paying, excluding the U.S. It is a fund that invests across all market caps within real estate globally.
Top country allocations include Hong Kong, Japan, Australia, China, Singapore, and Germany, with a full spectrum of 24 countries in total.
DRW carries an expense ratio of 0.58% and has a restructuring that is scheduled to go into effect April 20, 2022.
For more news, information, and strategy, visit the Modern Alpha Channel.