Can Homeownership Protect You From Inflation?

If you've been following the news today, you've likely heard about inflation's rise. You're probably also experiencing the effects in your daily life as gas and grocery prices continue to rise. These growing consumer expenditures might strain your finances and force you to reevaluate any planned large purchases to ensure they are still worthwhile.

If you've been considering acquiring a home this year, you may be debating whether you should forward or whether it would be more prudent to wait. The answer depends on your circumstances, but here's how homeownership can help you combat inflation's rising costs.

Homeownership Provides Security and Stability

According to Investopedia, during periods of strong inflation, all prices increase. This holds for products and services such as food, entertainment, and housing. Both rental and homeownership costs are on the rise. How can you, as a buyer, protect yourself against rising prices? The solution is homeownership.

Buying a property allows you to stabilize your largest monthly expense, which is often housing. When you obtain a fixed-rate mortgage for your house, you lock in your monthly payment for the life of the loan, typically between 15 and 30 years.

Therefore, even if other costs increase, your home payment will remain stable, allowing you to maintain a stable budget. If you rent, you will not have access to this benefit and will not be protected from rising housing expenses.

Utilize Home Value Appreciation to Your Advantage

While it's true that rising mortgage rates and housing prices make buying a house today more expensive than it was a year ago, you can still position yourself for long-term success. Purchasing allows you to lock in current rates and pricing before they increase.

During periods of inflation, investing your money in assets that typically maintain or increase their value is vital. In most decades dating back to the 1970s, home price increase outpaced inflation, making homeownership a historically effective hedge against inflation.

What does this imply for you? As a result of the current supply-and-demand imbalance, analysts predict that housing prices will continue to rise. Any home price rise after purchasing a home will increase your equity and net worth. And since homes are often assets that appreciate (even during periods of inflation), you may rest assured that your investment is sound.

Bottom Line

If you are prepared to purchase a property, it may be prudent to proceed despite growing inflation. A reputable real estate professional can assist you if you need assistance on time your purchase based on your unique circumstances.