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When inflation is this high, should you purchase a home?

Friday, July 22, 2022   /   by Laura Larson

When inflation is this high, should you purchase a home?

Despite the Federal Reserve's best efforts, inflation is still increasing, according to the most recent figures. You undoubtedly feel the strain on your finances at the gas station and the grocery store, but this information may also make you wonder if you should still purchase a home at this point in time.

Greg McBride, Chief Financial Analyst at Bankrate, explains how inflation is affecting the housing market: “Inflation will have a strong influence on where mortgage rates go in the months ahead... Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.”

Since it is unclear how long it will take to control inflation, it is also uncertain how mortgage rates will develop in the future. Here are some instances of why both inflation and mortgage rates are crucial for you and your housing ambitions, despite how uncomfortable that uncertainty might be.

Mortgage rates and housing prices are important factors when purchasing a home. Higher mortgage rates have an effect on your monthly payment amount, which has an impact on how much you can comfortably afford. Furthermore, even while it is undeniably more expensive to purchase and finance a home this year than it was last year, this does not imply you should stop looking. This is why.

Owning a home has historically been a fantastic inflation hedge
Prices generally increase in an economy that has inflation. Owning a home has historically been an excellent way to protect yourself from those rising prices because you can fix what is probably your biggest monthly payment (your mortgage) for the life of the loan. This helps some of your monthly expenses remain stable. Not to mention that your home's worth will increase when home prices rise. That’s why Mark Cussen, Financial Writer at Investopedia, says: “Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values."

Also, no one is calling for homes to lose value. As Selma Hepp, Deputy Chief Economist at CoreLogic, says: “The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”.

In summary, you don't have to put off looking for a property because of growing inflation or increased mortgage rates. There are many good reasons to buy a home right now, including meeting your changing circumstances, demands, aspirations and so much more, in addition to protecting yourself from the effects of inflation and increasing your wealth through continued price appreciation.

Bottom Line
Homeownership is one of the best decisions you can make in an inflationary economy. You get the benefit of the added security of owning your home at a time when experts are forecasting prices to continue to rise. If you are contemplating buying a home and want to learn more about this changing market, contact Laura Larson to start the process with a true professional.