Inflation hasn’t left the building, but it may be starting to look for the exit.

In October, the Consumer Price Index rose 0.4 percent — the same increase as in September. Over the last 12 months, the all-items CPI increased 7.7 percent. Not only is this less than what most economists had expected, it’s the smallest year-over-year increase since January 2022.

Perhaps the Federal Reserve’s efforts to slow inflation are finally bearing fruit. So far the Fed has raised interest rates five times this year with a sixth expected after the December meeting. The current slight cooling has led to experts anticipating a smaller hike in December — perhaps a 50 basis point increase versus the 75 basis points hike the previous five times.

But it’s not all good news — especially on the housing market front.

What’s happening in the housing market now

For one thing, the Fed’s interest rate hikes have increased mortgage rates to more than 7 percent. For another, prices for shelter in the CPI continued to rise — the rent index rose .7 percent and the owners’ equivalent rent index rose .6 percent last month — and in fact were “the dominant factor” in the monthly all-items index’s increase, contributing to over half of it, the Bureau of Labor Statistics reported.

Nationally, home prices rose 11.4 percent year-over-year in September, CoreLogic reports. While that represents a slowdown, it’s still high by historical standards. In a persistent trend, both homebuyers and sellers feel less optimistic about their prospects, according to Fannie Mae’s latest index.

In fact, only 16 percent of people surveyed feel it’s now a good time to buy a home. Those who believe now is a good time to sell a home decreased sharply from 59 to 51 percent in October.

“The HPSI [Home Purchase Sentiment Index] reached an all-time survey low this month, in line with expectations that the housing market will continue to cool in the months ahead,” said Fannie Mae Senior Vice President and Chief Economist, Doug Duncan, in a statement.

“Consumers are increasingly pessimistic about both homebuying and home-selling conditions. Amid persistently high home prices and unfavorable mortgage rates, the ‘bad time to buy’ component increased to a new survey high this month, while the ‘good time to sell’ component continued its downward trend,” he added.

Should you wait for inflation to come down more?

With inflation still weighing on the economy and housing market, should you buy a home now? What about selling your home now?

If you can’t make the numbers work, it’s OK to wait things out instead of buying a home today to beat increased prices and rates, especially if you’re a first-time buyer. While you’d be putting off building equity, you might find you’re in a better position to buy in the future, when the market cools and your income potentially has had an opportunity to grow.

“Even when inflation does come down on a consistent basis, it doesn’t mean prices falling; it just means prices not rising as fast,” says Greg McBride, chief financial analyst for Bankrate. “For homebuyers, a more modest pace of appreciation or even a period of stagnant home prices can allow for incomes to grow further. Rather than stretching too much now, you may be able to buy a bit more comfortably in a couple of years if your income growth outpaces home price growth. But there are no guarantees, and rents have certainly spiked in the meantime.”

That said, the circumstances of your life might require you to buy a home now, and that’s as acceptable a reason as any. Because you’re buying at the peak or near-peak of the market, be prepared to stay in the home for a while if you want to come out ahead when you sell.

For sellers, the tides are turning. Depending on where you live, you could find fewer takers, or need to come down on price. Let’s not forget what happens on the other side of the transaction: When you go to purchase your next place to live, you’ll be competing for a limited number of available properties — and now likely obtaining a new mortgage at a higher rate, to boot.

Tips for buying in an inflationary environment

If you’re set on buying soon, you can try stretching your dollars by:

  • Putting your down-payment savings in a high-yield account – One upside to inflation and the Fed’s response: higher interest rates on savings accounts. If you aren’t already, put your down payment contributions in a high-yield account. Just make sure the account allows you to access your money easily when it comes time for closing — some online savings accounts take three days to deliver your funds when you withdraw.
  • Considering a mortgage lender with low or no fees – While it might be more convenient to get a mortgage at your bank, banks typically charge an origination fee, often 1 percent of the amount you borrow. Many non-bank and online lenders don’t, so if you can find a no-fee lender with attractive rates, you’ll keep more money in your pocket.
  • Locking in your mortgage rate – When you find a lender and are applying for a loan, ask about locking in your rate. Now’s not the time to take a chance on the size of your monthly mortgage payment suddenly soaring, right before you’re set to close.