November 27, 2022 | Sexton Real Estate Group
There are many reasons to buy real estate during inflation. Inflation can be caused by a number of factors, such as an increase in the money supply, a decrease in the value of the currency, or an increase in government spending. When prices for goods and services rise, investors tend to flock to tangible assets like real estate.
What Causes Inflation?
Before we discuss 5 reasons to buy real estate during inflation, it’s important to understand what causes inflation. Inflation is when prices of goods and services increase over time due to a rise in demand or a decrease in the supply of certain products. This can be caused by anything from an increase in consumer spending, higher taxes, or an increase in production costs, to name a few. When inflation occurs, the purchasing power of our money decreases and we can buy less for the same price because prices have gone up.
Why Investing In Real Estate Is A Financially Savvy Decision During Periods Of High Inflation?
Inflation is at an all-time high, but why does investing in real estate still seem like a sound decision? Inflation is often seen as a bad thing, but when it comes to real estate investing, it can actually be a good thing.
Whether you are a first-time home buyer or a real estate investor, there are many compelling reasons to consider buying real estate during times of crisis. Real estate is often seen as a hedge against inflation, and even during periods of economic downturns, it can still be one of the best investments you can make. Here are five reasons to buy real estate during an inflationary period:
1. Property Values Go Up Over Time
Inflation is an economic phenomenon that occurs when prices of goods, services, and investments increase over time. This overall spending power decrease leads to higher costs for consumer goods and services. While this may sound like a bad thing on the surface, it actually presents an opportunity for those who are able to capitalize on it. One of the best ways to do this is to invest in real estate during an inflationary period.
Investing in real estate during an inflationary period is that the value of the property will typically go up over time. This means that even if you bought a property at its current market value, chances are it could be worth more a few years down the road due to inflation. This is especially true if you are able to purchase the property below market value, and then wait for it to appreciate over time.
2. Rents Go Up
Inflation affects many parts of our daily lives, and one of the most significant areas is the cost of renting a home. Rents go up during times of inflation for a variety of reasons. During inflation, rents will increase to cover the rising cost of living. Rents are typically set by landlords, who need to make more money in order to cover their costs and remain competitive in a crowded rental market. It’s important to be aware of these factors when searching for an apartment or home so that you can plan accordingly and make sure you’re not caught off guard by rising rents.
3. Interest Rates Usually Stay Low
In times of high inflation, interest rates are usually kept low in order to keep the economy from overheating. This means that you can get affordable financing for your real estate purchases, making them more accessible for you. With fewer people buying during an economic recession, there is less competition in the market which means that you may be able to secure better deals than usual.
4. It’s A Good Time To Invest
During periods of inflation, the cost of goods and services generally rises. This means real estate values tend to follow suit and increase in value. It’s important for investors to be aware of the current inflation rate and any trends it’s creating in the real estate market. When it comes to investing in real estate during inflation, understanding the market and its current state is key to making a good decision. Inflation can be beneficial for real estate investors in two main ways.
Inflation increases the liquidity of real estate. During periods of inflation, more people are buying and selling real estate, which means there is a higher demand for property. This increased liquidity can make it easier for investors to find desirable investment properties and secure good deals.
Inflation can be beneficial for real estate investors in that it often leads to a decrease in interest rates. As the cost of goods and services go up, the Federal Reserve will typically lower interest rates to encourage borrowing and stimulate the economy. Lower interest rates make mortgages easier to obtain, which can help investors secure better financing options for their investments.
5. You Can Hedge Against Deflation
If you fear that we may be entering into a period of deflation (where prices start going down instead of up), investing in real estate may be a wise move. Since property values tend to hold their value even in periods of deflation, buying now could help protect your investment against negative market conditions later on down the road. No matter what type of real estate investment you are considering, it’s always a good idea to do your research and speak with an experienced professional before making any financial decisions.
In conclusion, investing in real estate during an inflationary period can provide a number of benefits and should be considered as part of any long-term investment strategy. With interest rates staying low and the potential for capital appreciation, now could be the perfect time to make your move. Take the time to do your research, speak with an experienced professional, and make sure you’re making the best decision possible for your future.
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