When comparing inflation to national home prices, we are able to identify two recent price bubbles in the United States. Specifically, we can see the housing price bubble that resulted in the mortgage crisis of 2008. Secondly, we can see an even larger housing bubble as a result of the recent COVID pandemic. Although past economic trends are usually a great predictor of the future, it is possible that a sharp increase of the inflation rate in 2020 could result in a different outcome when this current bubble eventually subsides.
When comparing federal funds rates to 30-year mortgage rates, we see that a sharp change in the federal funds rate seems to influence the trend of the 30-year mortgage rate. Therefore, long term investment in real estate assets is affected when the Federal Reserve makes drastic changes; especially during the COVID pandemic.