We hear it night after night. There is a new boogie man in town: Inflation! The 24hr news networks love inflation stories because they are one of the few four quadrant news stories left that can appeal to everyone across both sides of the aisle. It’s one thing to be aware of inflation and its impacts at the gas pump or grocery store, but it is another thing to understand its effect on the real estate market. Why don’t you hear about it that often, you may ask? Because it’s not all bad news! There are definitely some positive aspects to inflation on the real estate market and that means that our news stations are less likely to report it because it is good news instead of doom and gloom which typically draws more clicks, pageviews, and eyeballs. So, let’s talk good news, shall we?
Inflation’s Upsides
Inflation is basically the percentage increase in the number of dollars it takes to purchase a good or service from one day to the next without the goods or service changing. That is a very basic explanation, but that is ok for now. In that case, that means that things that you own like a house or investment property literally goes up in value at a rate in line with the inflation percentages.
This is DOUBLY good if you have a mortgage or loan on the property. Why, you may ask? Because the loan amount doesn’t change with inflation but the amount of dollars your home is worth does. That means that you can make a profit on your home and pay off your loan more easily than if inflation stayed the same from the time you got your loan until you paid it off. Free money, basically!
When inflation goes up generally the price of your home goes up too. This is good for homeowners looking to sell but also if you just bought a home. Your home is worth more. A rising tide raises all boats, so to speak.
Inflation’s Impact On Investment Properties
Inflation brings an increase in rent, which isn’t the best news when you are a renter, however if you own investment properties, it can be good news. Times of high inflation can also be a good time to buy a home because rent is up and good for sellers because you can ask for more.
To speak more to this point, Ari Rastegar from Forbes Magazine tells us that: “real estate investments have the characteristic of performing well in a rising rate environment. In particular, income-generating real property and multifamily have historically — and as I’ve witnessed from experience as an investor and developer — shown a greater ability to grow net income during expansionary periods than securities and other assets.”
The Experts At Taylor Realty Group Are Here To Help
Yes, higher inflation can have effects during everyday shopping and activities, however your mortgage payments stay the same. With every rising point of inflation, that is an equal percentage decrease relative to the value of the loan at origination. Stability in uncertain times for sure. Mike Taylor has been deeply involved in the Real Estate market since 2004 and he has seen many market corrections in his time. He is here to help you through the process, contact him today if you have questions. We got this, together.
In Conclusion
Inflation may be a popular boogie man on 24hr cable news, but if understood, you can definitely use it to your advantage more often than not. You have to be very conscious of the marketplace and the competition around you. Wondering what your home is worth and if it is the right time to sell? Give us a call! We will get you a FREE custom report in 3 minutes!
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