Wondering if it makes sense to buy a home today even when inflation is high? When other costs go up due to inflation, buying a home helps you keep your monthly housing expense steady.
Homeownership can provide some protection against inflation, although the extent of this protection can vary depending on various factors. Here’s how home ownership can help safeguard against inflation:
- Appreciation in Home Value: Historically, real estate has shown a tendency to appreciate over time, often outpacing inflation rates. When inflation occurs, the value of tangible assets like homes can increase, allowing homeowners to benefit from the appreciation. This appreciation can provide a potential hedge against inflation by preserving or increasing the value of the homeowner’s investment.
- Fixed Mortgage Payments: If you have a fixed-rate mortgage, your monthly mortgage payments remain unchanged over the life of the loan. In an inflationary environment, the cost of goods and services generally rises, but your mortgage payment remains the same. This can lead to increased affordability as a percentage of your income over time. As your income potentially increases with inflation, your mortgage payment becomes relatively smaller, providing a measure of protection against rising living costs.
- Rent vs. Own: Inflation can impact both homeowners and renters, but homeowners may have more control over their housing costs. While rental prices can increase in response to inflation, homeowners with fixed-rate mortgages have more stability in their housing expenses. Owning a home can provide a sense of security, knowing that your housing costs are relatively stable and not subject to sudden increases.
- Equity and Home Equity Loans: As you pay down your mortgage, you build equity in your home. Equity is the difference between the market value of your property and the amount you owe on your mortgage. Homeowners can tap into their equity through home equity loans or lines of credit, providing a potential source of funds to address inflation-related expenses. This flexibility can help homeowners navigate financial challenges caused by inflation.
However, it’s important to note that there are no guarantees when it comes to real estate and inflation. Factors such as location, local housing market conditions, and economic trends can influence the performance of the housing market and the value of individual properties. Additionally, inflation can have broader impacts on the overall economy and other aspects of personal finances, such as the cost of maintenance, property taxes, and insurance.
While home ownership can offer some protection against inflation, it’s crucial to consider it as part of a diversified financial strategy. Other investments, such as stocks, bonds, and commodities, can also provide avenues for safeguarding against inflation and achieving long-term financial goals. Consulting with financial advisors or professionals can help you develop a comprehensive plan that aligns with your specific circumstances and objectives.
Steve Schappert Founded, and is the broker at Connecticut Real Estate, Schappert owns The Connecticut Art Gallery and Home & Art Magazine Steve also designed, built, and shipped a zero-energy double-walled home to Germany. Schappert is an abstract painting artist and has painted, renovated and provided energy audits for over 1300 homes.
When it comes to real estate, construction and energy efficiency, Steve Schappert is one of the most sought-after experts in the field. With more than 40 years of experience in these areas, he has become a trusted source for reporters looking for insights on the industry. From helping develop net-zero homes to advising on sustainable building practices, Schappert’s knowledge and expertise is unrivaled. Whether it’s for a news article or an in-depth magazine story, reporters turn to Steve Schappert as a reliable source of information. With his expertise and guidance, they can ensure that their stories are accurate and up-to-date.
In the last year I have been interviewed by ABC News Manhattan, Connecticut Magazine and featured in 2 articles in The Washington Post.
If you are looking for a creative broker that thinks outside the box and has been a recognized expert for over 30 years call or text 203-994-3950
