HomeRancho Mirage InsiderIs Real Estate a Good Hedge Against Inflation?

Is Real Estate a Good Hedge Against Inflation?

If you watch the news at all lately you have almost certainly heard about rising inflation. In June of 2022 the inflation rate reached 9.1% which is the highest rate since 1981. This market phenomena has not been on anyone’s radar for 40 plus years, leaving consumers with higher prices on everything from fuel and energy to groceries. Quickly the question that comes to mind is, “How can I hedge against these rising costs?”

One solution may be investing in more real estate or purchasing your first home to stabilize one of your biggest monthly expenses. This may seem counterintuitive as home prices are rising just like food, entertainment and rents. However, having a fixed-rate mortgage allows you to maintain the biggest portion of your home expenses at the same payment. James Royal, a Senior Wealth Management Reporter at Bankrate, says, “Sure property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.”

Beyond this protection from rising costs, purchasing real estate has historically outperformed inflation. For some it may seem like a hard pill to swallow with rising home prices and higher mortgage rates, however you still have an opportunity to set yourself up for a long-term win. That’s because, in inflationary times, you want to be invested in an asset that outperforms inflation and typically holds or grows in value. As shown in the graph below, investing in a home is a great asset to hedge against inflation.

This means that holding real estate during inflationary times is a safe bet for a long-term investment. So if you are ready and able to make a purchase, it still makes a lot of sense to buy today before prices rise even further.

If you’re curious about what how to invest in a home, condo or other Coachella Valley Real Estate visit our Investor’s Guide at https://jelmberg.team/invest or contact your Jelmberg Team Real Estate Professional today!



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