It is a well-known fact that the investment landscape can be tricky to navigate, especially during periods of high inflation. However, there’s one investment avenue that not only stands the test of time but also thrives in such scenarios – real estate. According to a recent annual survey by Gallup, Americans have voted real estate as the best investment for the ninth consecutive year. The graph below shows the results of the survey since Gallup began asking the question in 2011. As the trend lines indicate, real estate has been gaining ground as the clear favorite for almost a decade now:
Investing in real estate has always been considered a smart financial decision. This belief is even more prevalent today, amidst high inflation rates. If you are contemplating purchasing a home, let this poll reassure you. Even when inflation is high, like it is today, Americans recognize that owning a home is a powerful financial decision.
Real Estate as a Hedge Against Inflation
Rising inflation signifies escalating prices across various sectors, including goods, services, housing costs, and more. Because inflation reached its highest level in 40 years recently, it’s more important than ever to understand the financial benefits of homeownership. When you purchase your home, you lock in your monthly housing payments, thereby shielding yourself from any potential increases for your most significant monthly expense. Comparatively, renters do not enjoy this benefit and are left unprotected against these increases, especially as rents rise. As Danielle Hale, Chief Economist at realtor.com, noted,
“Rising rents, which contribute to climb at double-digit pace… and the prospect of locking in a monthly housing cost in a market with widespread inflation are motivating today’s first-time homebuyers.”
The Correlation Between Inflation and Home Prices
Another aspect to consider is that your house is an asset that is typically appreciated over time, even during inflation. As prices rise, the value of your home follows suit. As Financial Writer for Investopedia, Mark Cussen, puts it,
“There are many advantages to investing in real estate… It often acts as a good inflation hedge since there will always be a demand for homes, regardless of the economic climate, and because as inflation rises, so do property values…”
Rising home values contribute to increasing your equity and, subsequently, your net worth, making homeownership a historically good hedge against inflation.
Buying a home is a powerful decision. It’s no surprise that so many people view it as the best long-term investment, even when inflation is high. When you buy a property, you not only shield yourself from increases in your housing costs but also own an asset that typically appreciates with time. Understanding how buying a home can be a great investment is crucial in navigating the investment landscape. If you’re considering investing in real estate and need guidance to find the right property, don’t hesitate to reach out. We’re here to assist you with your real estate investment needs.
Information provided by Keeping Matters Current