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How Homeownership Can Help Shield You From Inflation

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How Homeownership Can Help Shield You From Inflation

By Paul Gardner | Industry Topics | Comments are Closed | 10 May, 2022 | 0

Inflation is wreaking havoc on the U.S. economy and, therefore, consumer pocketbooks.

Inflation in the U.S. over the past year has ballooned faster than at any other point over the last

40 years, reports AP Business writers Paul Wiseman, Anne D’Innocenzio, and Mae Anderson.

This has led to significant price increases in consumer goods, which is having a severe impact

on people’s purchasing power. That’s because inflation causes prices to rise and the value of

money to fall. So consumers end up spending more money on fewer goods.

This includes real estate where you get less house for a higher price as inflation soars. What’s

different about real estate, though, is that property ownership can actually be an insulator

against inflation.

Owning a Home Protects You From Inflation

A fixed-rate mortgage is protection from inflation. How?

Consider this. As inflation goes up, so do home prices and rent. Renters have to pay rising rents

as dictated by their landlords who are trying to keep up with inflation to cover their rental

property expenses. But, if you own your home and have a fixed-rate mortgage, your monthly

payment will never change no matter how much inflation rises.

Also, the increase in property values means an increase in the value of your biggest asset –

your home. The cost of your home remains the same as when you purchased it, but its value

increases with inflation. This means you are building more equity as well as a greater net worth

even as the costs of goods soar.

Now May Be a Good Time to Purchase a Home

If you are considering purchasing a home, now may be a good time to do so. As explained

above, homeownership provides stability and financial security during times of rising inflation.

Buying a home now locks in the current interest rate for the life of the loan, and, since real

estate is an appreciating asset, your investment now may pay dividends later if you choose to

sell.

That said, one of the key ways of fighting inflation is raising interest rates. Though rates are still

low, the Federal Reserve has been slowly raising its benchmark rate to slow inflation. In March,

it did a quarter-percentage point raise and recently ordered a half-a-percentage point raise for

June. This means interest rates on mortgages will continue to climb.

So before you jump into buying a home as a means of combating inflation, carefully review your

finances and current interest rates to create a realistic budget. Depending on the numbers and

your personal situation, now may be a good time to make that investment, especially as industry

experts anticipate home prices will continue to go up through 2022, which means the value of

property will continue to increase.

Inflation, Realtors, Title Industry, Title Insurance

Paul Gardner

Paul’s core practice centers on the examination of title and real estate transactions. He has extensive litigation experience, and has spent several years representing and advising lawyers, real estate agents, and insurance agents in connection with professional liability claims.

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