Homeownership Is A Great Hedge Against Inflation

Homeownership Is A Great Hedge Against Inflation

  • Zita Billmann
  • 09/12/22

Over the past couple of months, the news of rising inflation is fueling concern across the country. Although inflation is a natural occurrence in any economy, currently inflation is at a 40-year high and experts predict it is expected to continue to rise. One way to help inflation-proof your future is by getting in on the housing market.

President Franklin Roosevelt once said “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” This is still true today, with home ownership offering real and financial security even in economically uncertain times.

According to Bankrate, buying property can be a hedge against inflation in the following ways:

  • Theoretically, as the inflation rate rises, so should the value of the home
  • The loan-to-value ratio of your mortgage will decrease as the property’s value increases. “In other words, your fixed-rate mortgage payments stay unchanged while your home’s equity rises.”

In a world where gasoline and groceries can increase in price at a moment’s notice, having some financial stability is key. A fixed rate mortgage will stabilize the largest monthly expense. Most people budget 25-45% of their monthly income for housing. That fixed rate mortgage will be locked in, along with the price you bought the home for, and that means you’ll be paying a lot less, as rates and prices increase.

The second advantage is that home values historically outperform other assets in appreciation. While there are factors like maintenance you’ll need to consider, a home and the land it sits on have consistently been one of the best ways to hold your money over economically troubling times. Owning a home also builds equity for the future that is based on a tangible asset. Even if the home loses value short-term, some studies show that over 7-years, homeowners should gain more equity than other investments. When economic conditions do improve, you’ll be able to take that equity and utilize it.

The bottom line is that if you’ve been thinking about buying a home this year, it makes sense to continue with those plans. Owning a home is one of the best financial investments that can be made.

 

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Whether you are a first time homebuyer, looking to upsize to a larger home, relocating to or from the area, or downsizing as an empty nester, my expertise and 20+ years sales experience will get you where you want to go.

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