How Homeownership Can Shield You From Inflation

Today we’re talking about rising inflation and what you can do to shield yourself from its impacts. Inflation is all around us, from the necessities to the luxuries, we’re seeing our wallets impacted in just about everything we purchase. With prices going up and interest rates on the rise, you may be re-evaluating whether or not purchasing a home this year makes good financial sense. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.

Investopedia.com (which if you haven’t checked out, it’s a site I highly recommend) explains that during a period of high inflation, prices rise across the board. Everything from food, entertainment, goods and services, and even housing. But it’s not just the price to purchase a home that’s rising; the cost of rent is going up as well.

It’s estimated that rental prices in Central Florida have gone up by 24% in the last two years, with rents in some areas of Florida jumping by as much as 39%. So, how do you protect yourself from these huge increases? The answer lies in homeownership. Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. If you get a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, which is often 15 to 30 years.

So even if other prices rise, your housing payment will be a reliable amount that can help 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. Your landlord can, and very likely will, raise the cost of your rent to keep up with inflation, and as a renter, your only choice is to find another place to rent and unfortunately, there just aren’t that many options available.

While it’s true rising home prices and mortgage rates mean that 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 at today’s rates and prices before both climbs higher. While no one has a crystal ball, experts agree both interest rates and home prices will continue rising in the months- if not years- to come.

Another reason to invest in homeownership is that during inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. Let’s take a look at what that means for homeownership. Here we see the inflation rate in blue compared to home price appreciation in green over the last 50 years... Notice that 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? Thanks to the ongoing imbalance in supply and demand, experts predict home prices will only go up from here. Once you buy a home, 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 during 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 may make sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation and how to time your purchase, let us know so we can come up with a plan that works best for you.