The Federal Reserve is continuing its efforts to reduce inflation, with the latest data indicating that the rate remains high at around 8%. This has had an impact on the stock market and increased talk of a recession.
The increasing cost of goods and services can make it difficult to afford a home. You may be wondering if you should buy a home in this economic climate. Here is what you need to know.
Homeowners Have An Opportunity to Hedge Against Inflation
In an economy with inflation, prices tend to rise for most goods and services. Historically, homeownership has been a good way to protect yourself against these rising costs because you can lock in your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses.
James Royal, Senior Wealth Management Reporter at Bankrate, explains:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”
The ability to protect yourself from future rent hikes and stabilize your monthly payments may be more important than ever. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), recently explained what happened to rents in the latest inflation report:
Rents have been increasing at a faster pace than overall inflation.
This increase can make it difficult for people to keep up with their monthly payments.
However, by using a rental stabilization program, you can protect yourself from future rent hikes and keep your costs more stable.
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains what happened to rents in the latest inflation report:
“Inflation refuses to budge. In September, consumer prices rose by 8.2%. Rents rose by 7.2%, the highest pace in 40 years.”
When you lease a property, your monthly payment is determined by the lease agreement, which typically renews on an annual basis. With inflation high, your landlord may be more likely to increase your payments to offset the impact of inflation. That may be part of the reason why a survey from realtor.com shows that 72% of landlords said they plan to raise the rent on one or more of their properties in the next year.
Being a homeowner can be a great way to achieve stability and security during times of financial difficulty. Owning your own home can provide a reliable place to live, even in tough economic times. If you are able to become a homeowner, it can be a great way to protect yourself and your family in the long term.
Sandi & Debbie Say…
The best hedge against inflation is to have a fixed housing cost. If you are looking to learn more and start your journey to homeownership, let us connect with you. Contact us today at (949)293-5139.
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