advantages of owning real estate
An interesting look at owning real estate from an inflation perspective. It is true, that if you have a fixed rated mortgage, your payments will remain constant throughout the life of the loan, thus making it a good hedge against any future inflation. Buy now while interest rates at their lowest rates in many, many years and FIX your future housing costs (mortgage costs). Heck of a deal! Thinking of buying in the Austin or Highland Lakes areas of Central Texas? Sign up for Free automatic email listing updates.
REAL ESTATE AS A HEDGE AGAINST INFLATIONWe 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%
Here's a look at 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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