Real Estate as a Hedge against Inflation
by The KCM Crew
We haven’t heard a lot about inflation recently. However, prices have started to creep upward over the last year. As examples, here are a few categories that increased from November 2010 to November 2011:
-Food at home – up 6.2%
-Housing fuels and utilities – up 3.5%
-Transportation – up 9.2%
Today, we want to address the issue of inflation and the advantages of owning real estate. The National Association of Realtors (NAR) took an historic look at the impact of inflation. Here are some inflation numbers over the past 30 years:
We can see that real estate has fared very well. The most important number is the $0 increase in mortgage amount. The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.
NAR then looked at inflation moving forward over the next thirty years. Obviously, if it remained the same as the last thirty years the percentage increase would be the same. They looked at a low inflation scenario and a high inflation scenario. The graph below shows the findings:
Bottom Line
We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today. Either would be a great hedge against future inflation.
If you are considering Relocating to Colorado Springs, Purchasing a Home for Sale in Colorado Springs, considering Selling a Home in Colorado Springs, or want more information on the Colorado Springs Real Estate Market, Contact your Colorado Springs Real Estate Expert, Mike MacGuire Today! Click Here to Check out my informational video if you are considering Selling a Home in Colorado Springs. Click Here to Check out my informational video if you are considering Purchasing a Home for Sale in Colorado Springs.
We haven’t heard a lot about inflation recently. However, prices have started to creep upward over the last year. As examples, here are a few categories that increased from November 2010 to November 2011:
-Food at home – up 6.2%
-Housing fuels and utilities – up 3.5%
-Transportation – up 9.2%
Today, we want to address the issue of inflation and the advantages of owning real estate. The National Association of Realtors (NAR) took an historic look at the impact of inflation. Here are some inflation numbers over the past 30 years:
We can see that real estate has fared very well. The most important number is the $0 increase in mortgage amount. The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.NAR then looked at inflation moving forward over the next thirty years. Obviously, if it remained the same as the last thirty years the percentage increase would be the same. They looked at a low inflation scenario and a high inflation scenario. The graph below shows the findings:
Bottom LineWe can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today. Either would be a great hedge against future inflation.
If you are considering Relocating to Colorado Springs, Purchasing a Home for Sale in Colorado Springs, considering Selling a Home in Colorado Springs, or want more information on the Colorado Springs Real Estate Market, Contact your Colorado Springs Real Estate Expert, Mike MacGuire Today! Click Here to Check out my informational video if you are considering Selling a Home in Colorado Springs. Click Here to Check out my informational video if you are considering Purchasing a Home for Sale in Colorado Springs.
Comments