Homeownership and Inflation : A Closer Look

The world is experiencing an unprecedented level of inflation right now, with prices of goods and services soaring higher than ever before. From food and gas to housing and healthcare, the cost of living is increasing rapidly. This has left many people wondering what they can do to protect themselves from the effects of inflation.

One solution that has been gaining traction in recent years is homeownership. Many financial experts are now advising people to invest in their own homes as a way to hedge against inflation.

So, how does homeownership serve as a hedge against inflation? Let's take a closer look.Owning a home can provide a hedge against inflation in several ways. Firstly, housing prices tend to rise along with the cost of living. This means that as inflation increases, the value of your home is likely to increase as well. According to data from the Federal Housing Finance Agency, US home prices rose by an average of 5.7% annually from 1991 to 2020. This is higher than the average inflation rate of 2.2% during the same period.

Moreover, if you have a fixed-rate mortgage, your monthly mortgage payment remains constant regardless of inflation. This means that as the cost of living increases, your mortgage payment becomes a smaller percentage of your income. In contrast, renters are at the mercy of landlords who may increase rent to keep up with inflation, resulting in higher housing costs.

Homeownership can also provide stability during times of economic uncertainty. Owning a home means you have a fixed housing cost and a stable living situation. This can help you weather financial storms and avoid the disruptions that can come with renting.

In addition to these benefits, homeownership can also provide a source of wealth accumulation over time. As the value of your home increases, so does your equity. This equity can be used to finance home improvements or other investments, providing a source of financial security.

According to data from the US Census Bureau, the median net worth of homeowners in the US is $255,000, compared to just $6,300 for renters. This highlights the potential for homeownership to be a valuable tool in building wealth and financial stability over time.

It is clear that ownership of a home can provide financial benefits for people in an environment with rising inflation. With the advantage of monetizing built equity and stable housing costs, homeownership can help hedge against the effects of market instability. In order to protect yourself from inflation, making smart decisions when purchasing a home are key. This means researching areas with promising economic growth, ensuring the house meets your needs and budget, and choosing the right mortgage type. Now that you have a better understanding of how buying a home can provide protection against inflation, it’s time to take action if you are looking to do so. If you’re considering investing in real estate, I encourage you to take advantage of my expert advice and experience. Let’s start by having an honest conversation about your goals—together we can create a plan that gives you peace of mind whenever times get tough.


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