• Kimberly Van Hal, REALTOR

How Homeownership Can Help Shield You from Inflation

Updated: Apr 28


If you’ve been following the news lately, you’ve heard about rising inflation. As prices have gone up for gas, groceries, and more, you've probably felt the pinch on your wallet. And that may have you re-evaluating any big purchases you'd planned to ensure they’re still worthwhile.

If a home purchase has been in your plans, you may be wondering whether you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.


Homeownership Offers Stability and Security

During a period of high inflation, prices rise across the board. Just like that's true for things like food, entertainment, and other goods and services, it's also true for housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.

Buying a home allows you to stabilize your largest monthly expense - the cost of housing. With a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, usually 15 to 30 years. Sure, property taxes rise, and other expenses may creep up, but the biggest portion of your housing expenses - your mortgage payment - remains the same. That helps keep your budget in check. If you rent, you don't have that same benefit and you won't be protected from rising housing costs.


Use Home Price Appreciation to Your Benefit

While it’s true rising mortgage rates and home prices mean buying a house today costs more than it did a year ago, you still have an opportunity to set yourself up for a long-term win. Buying now lets you lock in today’s rates and prices before both climb further.

In inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. The following graph shows how home price appreciation outperformed inflation in most decades going all the way back to the '70s, making homeownership a historically strong hedge against inflation.


So, what does that mean for you? Experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, any home price appreciation that does occur will be good for your equity and your net worth. And since homes are typically assets that grow in value, even in inflationary times, you have peace of mind that history shows your investment is a strong one.


Bottom Line

If you’re ready to buy a home, it makes sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation a trusted real estate advisor can help.

 

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