Real estate is a great hedge against the impact of rising inflation

Real estate is a great hedge against the impact of rising inflation

If you are following today's news, you have heard about the rise in inflation. Today, inflation is in maximum of 40 years. According to National Association of Home Builders (NAHB):

"Consumer prices accelerated again in May as rent, energy and food prices continued to rise at the fastest pace in decades. This marked the third consecutive month of above of 8% and was the biggest year-on-year gain since December 1981."

With inflation rising, you will likely feel that it affects your day-to-day life as prices rise for gasoline, groceries, and more. These rising consumer costs can hurt your wallet and make you reevaluate any big purchases you have planned to make sure they are still worth it.

If you are thinking about buying a house this year, you are probably wondering if you should continue on this path or if it makes more sense to wait. While the answer depends on your situation, here's how home ownership can help you combat the rising costs that come with inflation.

Homeownership helps you stabilize one of your biggest monthly expenses

Investopedia explains that during a period of high inflation, prices rise across the board. This goes for things like food, entertainment, and other goods and services, even housing. Both rent prices and house prices are on the rise. So, as a buyer, how can you protect yourself from rising costs? The answer lies in home ownership.

Buying a home allows you to stabilize what is usually your biggest monthly expense: the cost of housing. When you have a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, usually 15 to 30 years. James Royal, Senior Reporter for Wealth Management at Bankrate, says:

"A fixed-rate mortgage allows you to keep most of your living expenses with the same payment. Sure, property taxes will increase and other expenses may increase, but your monthly housing payment remains the same. That is certainly not the case if you are renting."

So even if other prices increase, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you will not have the same benefit and you will not be protected from rising housing costs.

Invest in an asset that historically outperforms inflation

While it is true that rising home prices and higher mortgage (home financing) rates mean that buying a home today costs more than it did a few months ago, you still have the opportunity to preparing for a long-term victory . This is because in inflationary times, you want to invest in an asset that outperforms inflation and usually maintains or grows in value.

The chart below shows how average house price appreciation has outpaced the average inflation rate in most decades since the 1970s - making home ownership a historically strong hedge against inflation (see the chart below):


So what does this mean for you?

Today, the experts provide that house prices will only go up from here, thanks to the continuing imbalance between supply and demand. After you buy a house, any house price appreciation that occurs will increase your heritage and your net equity. And since houses are typically assets that grow in value, you are assured that history shows that your investment is strong.

This means that if you are ready and able, it makes sense to buy today before prices rise further.


If you are thinking of buying a house this year, it makes sense to act sooneven as inflation rises. In this way, you can stabilize your monthly housing cost (or take advantage of rent growth to make more money) and invest in an asset that historically outperforms inflation. If you're ready to get started, let's connect so you get expert advice on your specific situation when you're ready to buy a home.

Are you in doubt?

Now that you know how inflation and house prices behave in periods of high inflation in the United States, you can consider investing in vacation homes in Orlando. To take advantage of all the tips we have brought to you and go even deeper, you can talk directly to our relationship agents. They are always willing to talk to you with any questions you may have about investing in Florida.

In this text we approached the theme the behavior of the real estate market during recessions because it is interesting for those looking to invest in Florida. If you want to read more content like the one we brought in this article, just stay tuned here on our blog.

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