How Homeownership Protects You From Inflation

Dated: May 27 2022

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Inflation Protection O'Brien Realty, bubble shields house and money from rising inflation arrow

By O'Brien Realty

Many fear that increasing inflation and interest rates will force them out of the housing market, but homeownership is actually your number one defense against inflation.


Everyone has felt the impacts of rising inflation in the U.S., especially in the past few months. Right now, the annual rate of inflation for April was 8.3%, the highest levels we’ve seen since the 1980’s. Unfortunately, inflation also contributes to raising home prices and interest rates (although it is not the only factor). While experts predict that they will continue to rise, that doesn’t mean that you should give up on your dream of home ownership. In fact, these conditions might be the best reason to start your home buying process since owning a home can be your biggest protection against them. 


How Homeownership Protects You 

To protect against inflation, you want to save money and invest in something that will continue to improve in value without being impacted by inflation. Purchasing your own home offers you the perfect investment opportunity to do this! Home ownership comes with a variety of benefits, but most importantly, it is an investment that will protect you from increasing rent prices, establish a set home payment, and continue to build equity through the years.


Lock In A Low Rate 

Unless you buy with cash, you will likely purchase a home with a fixed-rate or adjustable mortgage. Although they are a little different, essentially they both create a payment plan for you to pay off the reminder of what you owe on the home. (To find out which option is best for you, talk with a local lender) If you go with the fixed-rate mortgage, you and your lender will establish the best set payment plan over a set amount of time, guaranteeing you will have an affordable monthly payment. 


Right now, even though the interest rates have recently gone up, they are still historically low, hovering at around 5%. Purchasing a home now with a fixed-mortgage will give you a set monthly home payment and rate. Essentially, even if the rates go up with increasing inflation (and they are currently expected to do so) it won’t change what you pay. Buying your own home now will protect you from rising home costs for years to come. 


Stops Raising Rents & Concerns 

Rising inflation is increasing expenses for everyone and that includes landlords. Because of this, today’s renters are facing a pretty significant rent hike. Adding to that problem, the record high housing demand, increase in expenses, and promise of a hot seller’s market has resulted in many landlords selling their properties, leaving an even smaller number of available properties at even higher prices. Unfortunately, this is something that experts aren’t expecting to change over the next few years.


However, buying a home might be the investment you need to get out of this vicious cycle. Instead of worrying about losing your rental or constantly paying more, you can establish a monthly mortgage payment with your lender, anticipate those payments for the next few years, and plan the reminder of your expenses and finances accordingly. Buying your own home guarantees you a place to live and a set, affordable payment each month. 


Establish Increasing Equity 

The only thing better than something protecting you from rising costs and saving money, is something that will make you more money at the same time. Owning a home actually does both, making it one of the best investments you can make! Real estate values typically increase over time, and this is especially true in times of high inflation. An investment into the right home will continue to build equity over the years, and get you a good return on investment when you decide to sell.


This is especially true for today’s seller’s market. The low home inventory and high demand have led to home’s being sold for top dollar! Plus, this trend is expected to continue for at least another couple of years. So if you purchase a home now, you will have a chance to continue building equity until you are ready to sell. 


The Time To Act Is Now 

From an investment standpoint, if you are considering purchasing a home in the next few years now is the time to do so. Although many are tempted to wait to purchase a home until the market “settles down”, they will most likely end up waiting for a long time, and paying a lot more. Both rent and home prices are expected to keep rising, although not as fast as they were last year. In Southern Maryland, the average home price went up around 8% from where it was last year. The Fed is also expected to raise the interest rates again during their June 15th meeting by anywhere from ½-¾ of a percent. Buying now will help you get the best price for your home and provide you with the most protection from rising inflation.


So what are you waiting for? Start finding your dream home today!


Learn how to beat buyer competition here.


Start searching for homes in Southern Maryland here.

Need help with your home search or have questions about the process? Contact an O’Brien Agent today!


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