The Truth About Interest Rates and Inflation

The Truth About Interest Rates and Inflation

Here’s why real estate is still a fantastic hedge against inflation.

How are inflation and interest rates affecting our housing market? These factors are causing a huge shift in our market, and if you aren’t informed, you could end up making a huge mistake. That’s why we want to let you know what’s happening in our housing market. 

In case you don’t know, inflation is currently around 9%, which is historically high. As a result, the Federal Reserve has been raising interest rates. As rates rise, buyers’ purchasing power decreases, and demand falls.

“Real estate is a great hedge against inflation.”

However, our current interest rates are not bad by historical standards. In the 1980s, an 8% interest rate was considered fantastic. Now, rates are only around 5% or 6%. That’s still lower than our current inflation rate, which makes real estate a great hedge against the rising cost of living. 

Another thing to consider is that interest on your mortgage is tax deductible in most cases. This makes your interest rate lower than it appears at first. So if your interest rate is 6% or lower, and inflation is at 9%, you can accrue a lot of wealth through homeownership. The sooner you buy, the sooner you can take advantage of your appreciation. 

If you have questions about today’s topic or anything else, please call or email us. We are always willing to help! 

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