The current inflationary global economy is causing people all over the world, but especially in the United States to start taking inventory of their current financial situations and plan for what will likely be an uncertain few years. For some Americans, putting money into a home, starting a family, or starting a business was already put on hold due to the pandemic, but inflation has created an additional cause for concern in making big life decisions.
Believe it or not, buying a home during inflation is actually one of the safest financial moves someone can make, and here are some surprising reasons why.
Homes Appreciate in Value
Despite all of the negative news surrounding the markets, inflation, and interest rates on the steady rise, one thing that has remained a constant across time is that home values are almost constantly on the rise. Even in a down economy, a home’s value will generally appreciate anywhere from 3.5% to 3.8% annually on average.
For hot housing markets, this value could be even higher, but the bottom line is that a home is a safe investment that will appreciate in value without the volatility of the stock market. Granted, catastrophes can happen, but by and large home prices rebound even amid a bear market and will often retain value through poor economic times.
Get What You Pay For and Then Some
Part of what makes homeownership an appealing investment is what you get, what you pay, and how that changes (or rather doesn’t change) over time. There are very few products and services that are inflation-proof, but purchasing a home is one of the few out there aside from perhaps certain exceptionally low-returning stocks or bonds.
The point is that purchasing a house on a mortgage for, say, $150,000 will set your principal and interest rate at a fixed amount for the duration of your loan. However, if after a few years your home value increases to $200,000 or more, you still pay the same amount in your mortgage! There aren’t many investments you can make that increase in value while your contribution to them stays consistent.
Homes Historically Hedge Inflation
Wise investors are looking anywhere they can to hedge against inflation and market volatility by moving money into safer investments. For some, this could mean moving money into Treasury bonds or other safe harbors while others are looking into value and dividend stocks to keep their portfolio off of the current market roller coaster. But real estate is one of the safest hedges against an uncertain market in history.
Since home values are consistent even throughout an inflationary or volatile market, purchasing a home is an ideal way to hedge against the uncertainty of what’s happening in global economics. Not only do you own an asset that appreciates in value year-over-year, but you add an asset to your portfolio and add an investment into it which effectively adds to your net worth.
Real property and physical assets in a digital economy are an absolute godsend for those looking to keep their personal property and financial portfolios safeguarded from volatility. Even financial professionals are moving investment money into real estate securities as a way to invest in the housing marketing without actually purchasing physical properties.
Get Your Portfolio Inflation-Ready
To get started with your home purchase “investment”, it’s important to get pre-qualified for a line of credit through Tidewater Mortgage. Acting now can help you get a lot of the financial headaches out of the way, lock in the best interest rate, and have you ready to purchase a home ASAP!