Whether it’s the gas in your tank or holiday gifts, it seems that inflation has seeped into every aspect of daily life. But what about the real estate market? You might be wondering whether it’s the right time to buy or sell a home, or to purchase an investment property.
Here’s our breakdown of how inflation could affect you.
What Is Inflation?
Simply put, inflation is a period of rising prices for goods and services. The causes of inflation are many and complex; however, the biggest cause could be described as an increase in the supply of money which results in the value of the dollar decreasing. In some cases, the actions of the Federal Reserve can directly lead to inflation.
How Does Inflation Affect Real Estate?
Inflation affects the real estate market in a variety of ways. For one thing, the cost of borrowing money becomes more expensive. This can cause potential buyers to opt to save their money instead of getting a mortgage.
In some cases, inflation can lead to higher prices for property. However, decreased demand for real estate can sometimes counteract this.
How Should You Invest During Times of Inflation?
In times of inflation, investors have to be wise about their decisions. Rental property is almost always a smart investment during inflationary periods. Another good bet during this time is note investing. That’s because there is less competition for these during inflation.
Is Real Estate a Hedge Against Inflation?
If you’re looking for a hedge to protect against the effects of inflation, you can’t do much better than real estate. Since both rents and property prices tend to rise during inflationary periods, it’s an asset that provides a comfortable cushion against any potential financial impact. Additionally, any debt you owe on real estate will diminish in value during inflation, too.
If you want to purchase a rental property to guard against inflation, reach out to the experienced realtors at D Realty today.