What’s happening with inflation, and how does it affect real estate?
First, what is inflation? Essentially, inflation is the devaluation of the U.S. dollar. As prices increase, the dollars you have in your pocket today won’t be worth as much as they were yesterday. Because inflation affects currency, it impacts every aspect of our economy. You’ve probably seen prices increase for all sorts of things, and real estate is no exception.
“Real estate is a fantastic hedge against inflation.”
For example, the prices of building materials have increased across the board. Lumbar, siding, shingles, windows, and everything else that goes into building a new home costs more, and this is reflected in new construction prices. As people move away from new construction and toward the resale market, increased demand raises those prices as well.
So inflation is increasing, and it’s here to stay for the short term. What can you do to protect yourself? One of the best options is to hedge your cash by putting it into a fixed asset like real estate. This is because inflation causes the value of homes to increase. However, it also causes your purchasing power to decrease, so if you don’t own a house, you might want to buy one soon.
If you already own a home, inflation isn’t all that bad. You’ll be accruing equity at a faster rate, and our market was already hot.
If you want to purchase real estate to hedge against inflation or have any other questions, please call or email me. I’d love to help!