Buying a home before or during an inflationary period?
Updated: Aug 17, 2021
Are you scared of inflation and what it means to you financially? Some might say to “stay low” and not do any investment but regarding real estate it can actually be beneficial if you can lock in on a low interest rate. While the cost of everything else goes up, the cost of your home (locked interest rate) will stay the same as the value of your property rises.
On the flip side, a bad inflationary hedge would be to leave your cash in a savings account. Even though banks usually pay higher interest rates during inflationary periods, the value likely won’t outperform inflation.
3 Ways a Home Purchase Is a Reliable Hedge Against Inflation
Typically, inflation ushers in higher prices for everything, including mortgage rates, home prices and rental costs. So, if you’re considering buying a home and think we might be heading for rising inflation, here are some ways buying a home now can help you later.
Lock in a mortgage with a low, fixed rate. The average rate for a 30-year fixed mortgage is bouncing around the low-3% range, making this a great time to borrow money. As inflation increases, mortgage rates will likely climb, so folks who lock in a low rate now can avoid paying higher interest rates later.
You won’t be exposed to rising rent. The rising inflation tide lifts all boats, including rent prices. Homeowners are shielded from mounting rental prices because their cost is fixed, regardless of what’s happening in the market.
Property values increase over time. Tangible assets like real estate get more valuable over time, which makes buying a home a good way to spend your money during inflationary times.
Article from Forbes Magazine