How Homeownership Can Help Shield You from Inflation Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert.
How Homeownership Can Help Shield You from Inflation Christophe Choo at Coldwell Banker Global Luxury is Your Local Real Estate Expert.
If youāre following along with the news today, youāve likely heard about rising inflation. Youāre also likely feeling the impact in your day-to-day life as prices go up for gas, groceries, and more. These rising consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure theyāre still worthwhile.
If youāve been thinking aboutĀ purchasing a homeĀ this year, youāre probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, hereās howĀ homeownershipĀ can help you combat the rising costs that come with inflation.
Homeownership Offers Stability and Security
InvestopediaĀ explainsĀ that during a period of high inflation, prices rise across the board. Thatās true for things like food, entertainment, and other goods and services, even housing. BothĀ rental pricesĀ andĀ home pricesĀ are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.
Buying a home allows you to stabilize whatās 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, often 15 to 30 years. James Royal, Senior Wealth Management Reporter atĀ Bankrate,Ā says:
āA fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment.Ā Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.āĀ
So even if other prices rise, your housing payment will be a reliable amount that can help keep your budget in check. If youĀ rent, you donāt have that same benefit, and you wonāt be protected from rising housing costs.
Use Home Price Appreciation to Your Benefit
While itās true risingĀ mortgage ratesĀ andĀ home pricesĀ mean 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 todayās rates and prices before both climb higher.
In inflationary times, itās especially important to invest your money in an asset that traditionally holds or grows in value. The graph below shows how home price appreciation outperformed inflation in most decades going all the way back to the seventies ā making homeownership a historically strong hedge against inflation (see graph below):
So, what does that mean for you? Today, experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, anyĀ home price appreciationĀ that does occur will be good for yourĀ equityĀ and yourĀ net worth. And since homes are typically assets that grow in value (even in inflationary times), you have peace of mind that history shows yourĀ investmentĀ is a strong one.
Bottom Line
If youāre 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, letās connect.
Call Christophe Choo at (310) 777-6342 to tour your future home"HERE"
or click"HERE"to estimate your home value.