Why Inflation Shouldn’t Stop You from Buying a Home in 2022 

If you’re following along with the news today, you’re probably hearing a lot about record-breaking home prices, rising consumer costs, supply chain constraints, and more. And if you’re thinking about purchasing a home this year, all of these inflationary concerns are likely making you wonder if you should wait to buy. Investopedia explains that during a period of high inflation, prices rise across the board. And while home prices aren’t immune from this increase, here’s why inflation shouldn’t stop you from buying a home in 2022.

Homeownership Offers Stability and Security

Home prices have been increasing for quite some time, and experts say they’re going to continue to climb throughout 2022. So, as a buyer, how can you protect yourself from rising costs for things like food, shelter, entertainment, and other goods and services? The answer lies in housing.

Buying a home allows you to lock in your monthly mortgage payment for the foreseeable future. That means as other prices rise, your monthly payment will be consistent thanks to your fixed-rate mortgage. This gives you the peace of mind that the bulk of your housing costs are shielded from inflation.

James Royal, Senior Wealth Management Reporter at Bankrate, says:

A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”

If you rent, you don’t have that same benefit and you won’t be protected from rising housing costs. As an added incentive to buy, consider that today’s mortgage interest rates are lower than they have been in decades. While inflation decreases what your dollars can buy, low mortgage rates help counteract it by boosting your purchasing power so you can get more home for your money. They also help keep your monthly payments down. This is especially important during an inflationary period because you’ll want to protect yourself from the impact of inflation as much as possible.

Ali Wolf, Chief Economist at Zondaexplains:

“If you have cash and are expecting inflation, you want to think through where you can put your money so it does not lose value. Housing is commonly looked at as a good inflation hedge, especially with interest rates so low.”

Local Example

Locally, the current average sales price for a 3-4 bedroom home in the Minneapolis-St. Paul metro area is about $350,000. At a current interest rate of 3.25% and a 3% down payment, your monthly mortgage payment is going to be about $2,100/month (depending taxes and insurance). According to Norada Real Estate Investments, a real estate investment firm for investors, Minneapolis area rents for 3-4 bedroom apartments are between $1,900-2,200/month and have risen 6% in the last year. The fastest rising communities for rent are Maple Grove (11.8%) and Bloomington (9.9%) in the last year. With an ongoing housing crunch and lack of both single family homes for sale as well as homes/units for rent, rents will continue to rise into the foreseeable future. Within 3 years, that $2,000/mo rent could be as high as $2,380/mo (using an estimated 6% annual increase). But your monthly mortgage payment will continue to be $2,100 –saving you about $280/mo or $3,360/yr!   

Bottom Line

The best hedge against inflation is a fixed housing cost. That’s why you shouldn’t let it stop you from buying a home this year. Not sure where to start? Let’s connect so you have expert advice and help throughout every step of the home-buying process.

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