The reality that good news never makes the news does not take the edge off of the dreadful reports coming from media outlets in 2022. From the Russian invasion of Ukraine to continued supply chain disruptions to increasing urban crime to inflation -- always inflation -- we are bombarded with challenging circumstances and pessimistic forecasts. Some of these events seem worlds away but others, like inflation, are felt on a daily basis. Worse, the Board of Governors of the U.S. Federal Reserve ("the Fed") are looking to battle inflation by raising interest rates. How does this confluence of evil tidings affect home sales?

Will Real Estate Suffer for Putin's Mistake?

Coming out of the COVID-19 pandemic, and an extended period of low inventory of homes for sale, brokers do not see any significant improvements in the real estate market in the short term. In fact, the war in the Baltics makes things tougher. Freddie Mac -- the federally-backed mortgage investor -- reports that mortgage rates dipped from 3.89 percent to 3.76 percent after Vladimir Putin's tanks crossed the national boundary into Ukraine. This drop actually makes purchases affordable to more buyers, who are already competing in a higher-priced sellers' market. The cause behind the rate decline is that when the world gets more dangerous, investors choose bonds (i.e. debt) over stocks. So, the imbalance of buyers to sellers continues to worsen.

Does Inflation Help or Hurt Home Value?

If inflation is defined as more dollars chasing fewer goods, then real estate is right in the thick of it. As inflation climbs, so follows home value. Although easier mortgages give an edge to buyers, sellers can just as easily name their price -- even above appraised value -- and receive multiple offers. All in all, inflation is good for current owners but hinders would-be owners.

What about Interest Rates?

As noted above, the Fed is contemplating upticks in interest rates in 2022. Eventually, this increase in the cost of borrowing money will impact mortgage loan rates. As rates rise, loans become out of reach for some. This has the effect of shrinking the pool of buyers that is presently quite large. Reversing the stiffness of competition, an upturn in rates gives buyers a little more power to negotiate with sellers. Higher interest rates also benefit those who are saving up for a house.

...and Those Infamous Supply Chains?

A stubborn fact in real estate, even pre-pandemic, is that there is not a large inventory of available homes for sale. In theory, this should motivate an intensive home-building push. But supply chain disruptions are pushing back in areas like appliance shipment and lumber access. These result in delays and -- with inflation rising incrementally -- under-estimating costs by contractors. What might have begun as an affordable American dream gets inflated into a cost-prohibitive nightmare. All in all, supply chain problems can become possession problems unless delays and price hikes are accounted for.

How to Navigate the Challenges

Buyers know that when the market is competitive they have to rise to the occasion. If at all possible, remember that cash is king and all-cash offers can muscle out those involving substantial financing. Another strategy is to wait if circumstances permit. Even if inflation woes don't abate, saving up with higher interest rates at your back will be easier -- and lenders do like to see assets. Working delays and inflation into the planning stage is also advisable although this requires a good deal of research and some degree of luck.