Real Estate and Inflation
- December 06, 2011
We haven’t been hearing a whole lot about inflation, lately. However, prices of goods and commodities have been creeping upward over the past year. For example, from November 2010 to November 2011, food prices have increased by 6.2%, housing fuels and utilities are up 3.5%, and transportation costs have increased by 9.2%.
At Ryan Koch Homes, we want to help you understand the realities 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, represented in the "Median Home Price" and "Mortgage Payment" categories, has fared well. The most important number is the 0% increase in mortgage payments. The study assumed that the homeowner took a 30 year fixed rate mortgage thereby locking in the housing expense for the thirty years.
The NAR then looked at inflation moving forward over the next thirty years. If the inflation amount remains the same as the last thirty years, then naturally, the percentage increase will be the same. They looked at a low inflation scenario and a high inflation scenario. The graph below shows the findings:
We can lock in the housing costs of our primary residences and vacation homes at all time lows if we purchase today. This offers a great hedge against future inflation.
If you'd like more information about these findings, mortgage rates, or purchasing or selling a home, please contact me at: 608-219-9766. I'll be happy to talk with you and answer any questions you may have.
Portions of this content borrowed, with permission, from KCM Blog.
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