Buyers, Here’s How Owning Real Estate Can Protect You from Inflation

In July, inflation numbers declined slightly to 8.5% from June’s 40-year high of 9.1%. Food, gas, and clothing have all become more expensive, yet salaries haven’t increased at the same pace, leaving gaps in monthly budgets. Households have felt the strain of elevated prices. In times of economic uncertainty, many people will hold off on making large purchases. However, unlike purchasing a car or electronics, which start to depreciate in value seconds after the purchase, buying a home is an investment. Here’s why home ownership can help reduce the rising costs that come with inflation.

Homeownership Helps Stabilize Monthly Budgets
The cost of shelter accounts for a large portion of monthly expenses. During times of high inflation, home prices and rent can both increase, reducing the amount left over for expenses like groceries, gas, and savings. While home prices may be rising, purchasing a home is often the more affordable option than signing a rental lease. Here’s why: Rent can increase on a yearly basis, while homebuyers who have locked into a fixed-rate mortgage will be paying the same monthly payments throughout the duration of the loan, usually 15 to 30 years. This helps keep budgets in check. In addition, salaries and wages often rise over time, making mortgages more affordable. Homeowners who locked into their fixed-rate mortgages a decade ago are often paying less per month than renters, leaving more money for other expenses.

Homeowners Can Expect a Steady Home Appreciation
Home prices have soared over the last few years, which means it’s more expensive to buy a home today than it was a year ago. The short supply of homes for sale, combined with high demand from buyers, caused prices to skyrocket. That raging price growth has since slowed down, and the price of homes is expected to moderate over the coming years. Since the 1970s, average home price appreciation has outperformed the average inflation rate in most decades. When you invest in a home, you can expect its value to increase steadily over time.

High inflation and rising costs can make homebuyers question the timing of their purchase. Some buyers might be waiting to see if housing prices will decline, but that scenario is unlikely. Experts predict price growth slowing, but don’t expect a sharp drop in prices. Other homebuyers may be holding off to see if mortgage rates drop, but the current rates, although higher than the rock-bottom rates of the last few years, are still historically low.

Buyers, if you need expert advice on planning your next move, reach out today! We can find you a home that fits your needs and is a smart investment. Buying real estate is still one of the most stable investments a person can make, especially during a time of high inflation.

Marti Reeder, Realtor, Managing Broker