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Real Estate as a Hedge against Inflation

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.

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9 replies
  1. Redmond Oregon Real Estate Agency
    Redmond Oregon Real Estate Agency says:

    If the house turns out being wrong to suit your needs, you’ll
    regret your decision. Their inability to buy, among other sorts of factors for example high unemployment, tightening of credit guidelines and minimize wages to working families continue to defer home value appreciation. This helps out property clients determine what competition they are
    up against, and the way they can adjust and pinpoint the real opportunity available out there.


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