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Published July 21, 2022
Prices are on the Rise, Is Buying a Home Today a Good Decision
We understand you are in doubt about whether you should buy your dream house this year, this month, today, or… just let inflation and the situation that we have right now recede first.
In case you don’t know, inflation is the rate of increase in prices over a given period. It is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
According to the National Association of Home Builders (NAHB),
“Consumer prices accelerated again in May as shelter, energy, and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain” this has resulted in inflation today at a 40-year-high."
So, do you think buying a home today will be a good decision?
Let's see. Below are some of the points that we have prepared for you:
1. Buying a Home Offers Stable Monthly Costs
With a fixed rate mortgage comes stable monthly payments, which is one of the best benefits of owning a home. Unlike renting where rental payments may increase, the stable monthly payments that come with owning a home can provide some great peace of mind as it makes it easier to create a predictable monthly budget. Certainly, monthly payments can change when owning a home if property taxes or homeowners insurance were to change, but the amount of change in property taxes is normally very small.
As Danielle Hale, Chief Economist at realtor.com, says:
“With rents already at a high and expected to keep going up, rental affordability will increasingly challenge many Americans in 2022. For those thinking about making the transition from renting to buying their first home, rising rents will remain a motivating factor.”
2. Buying a Home Builds Up Equity
Equity is the value of a property that you actually own. For example, if your home is valued at $300,000 and you owe $200,000 to the lender, you have $100,000 in equity.
Equity grows as you pay your mortgage each month, thus lessening the amount you owe. A fixed-rate mortgage payment consists of a principal and interest portion.
James Royal, Senior Wealth Management Reporter at Bankrate, says:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.”
The longer that you own a home, the more you’ll pay towards the principal balance of any liens. As the balance of any liens against a property gets lower and hopefully the value of the property increases, the larger the equity
3. Buying a Home Means Investing in an Asset that Beats Inflation
Below is a graph where you can see how the average home price appreciation outperformed the average inflation rate in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):
So, what does that mean for you? Once you buy a house, any home price appreciation that does occur will grow your equity and your net worth. And since homes are typically assets that grow in value, you have peace of mind that history shows your investment is a strong one.
This is simple. As time goes by, the value of your home property increases. It does result in higher home prices and higher mortgage rates versus a few months ago, but that still means that it is a Win for you. Why? That’s because, in inflationary times, you want to be invested in an asset that outperforms inflation and typically holds or grows in value.
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Inflation can be tough on your budget, but you can fight back. Investing in real estate is one strong way to hedge against inflation. If you’re ready to get started, we are also ready to help you out. The Amy McDaniel team always makes sure that your real estate needs are not only just met, but exceeded!
