Most economists agree that recent rashes of government spending will ultimately lead to significant inflation. The constant infusion of cash that is intended as a short-term solution will eventually have a long-term effect on the value of a dollar.
One of the best hedges against this expected phenomenon is the purchase of a home during one of the best buyer’s markets in history. With low, low property prices and record low fixed interest rates, there has never been a better time to buy a home.
But if one takes into consideration the fact that a mortgage may be repaid with inflated dollars, the deal only gets better and better. By fixing housing expenses now in terms of the 2010 dollar of today, home buyers will be immune from contrary inflationary economic forces for as long as they own their property.
It’s a tremendous way to protect wealth and to meet your housing needs for decades to come.
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Have always, always preached real estate is your best hedge against inflation. And the waterfront properties you invest in are way way more fun than moldy smelling stock certificates in a safe or bank deposit box too. You can enjoy them, they are solid, visible and not intangible like stock values, CD rates on renewal.
Richard,
Well said, as one client recently shared, he'd rather have hard dollars in real estate than sell.
It's an amazing time to buy and I think there will be a lot of folks wishing they had bought a home in 2010 as soon as the interest rates start to rise.
All the best, Michelle
Richard it is a great time to purchase. Buyers have access to many homes on the market in our area, unbelievable interest rates and invest into something they can enjoy.
Richard, there truly is no better time. Waiting to see what will happen will most likely show an increase in house prices as well as interest rates!
Applause applause......great time...we are sounding like broken records...has there ever been a better one ?
Richard, it's easy and almost common place for Realtor to say "now is the time to buy". But you have said it very eloquently and provided excellent reasons for this being the right time. I'm going to reblog this and direct it to my Gilbert AZ market. Thanks. Bill
Richard,
Now is the perfect time for any buyer who didn't want to settle for less 3 years ago. You can buy your dream home in the Atlanta market TODAY. It's waiting!
Great post!
I'm completely amazed every time my lender sends me the interest rate sheet for the day, and even the 60-day lock is just ridiculously low! I can't help but wonder if we will ever see rates this low again in our lifetimes....I really don't know. Anyways, I'm with Bill up there: you couldn't have made your point more eloquently.
Richard....you are right on with this advice.....purchasing a home TODAY is a great hedge against inflation.....
Richard - and that is even if values drop a bit over the next couple years. If you are buying a home to live in for 7 - 10 years or more, its a great inflation hedge.
Fantastic post, Richard. That inflation is coming, so the logic behind buying a house now is not to be argued with.
So true -- we can see by looking at the markets in the past what an opportunity we have right now! In the late 80s when there were huge buying opportunities, I was too young and unsure to take advantage of the market. I always told myself that if the opportunity ever presented itself again, I would be buying real estate. Well, here we are, and I have!
Well said, well said. Prices are down, rates are down, currency is about to inflate like a balloon. You've taken the words out of my mouth.
Richard, what a brilliant way to explain how buying a home is indeed a hedge against inflation.
Richard,
Fantastic way of explaing the concept of the present cost of money, and tying it into a real estate purchase.
Rich
I don't think there is much doubt in anyone's mind inflation is on its way...terrific, timely post.
Richard,
That is definitely a new spin and a great way to look at the current situation! I love it and will be re-blogging! Thanks, Paige
Richard - Timely and accurate. Never has the affordability been better !
Richard...that is so true! We have bought 4 now and are looking to buy another. Better tahn 1% in the bank!
Good evening Richard,
Well said! Now is the time to make a real estate purchase..a great hedge against inflation!!
Richard:
With lower prices, historically low interest rates and so much to choose from we may actually be back at a place where the home purchase is once again "building that bank account."
Richard, so true and There is still a Tax Credit available for First Time Home buyers most people don't know about or talk about, I've written about Mortgage Credit Certification, everyone should be telling their clients about it.
I think that I can agree with you more than most- I decided to purcahse another hosue and rent out my current one- i will be making half of my new house payment with teh extra cash I am colextiong in rent... My friends are wondering how I am doing it- had to come in with some cash- but better real estate that the stock market? I can put 6 thousand in it and make at least 30-50 out of it just for the neighborhood.... But I am making it my home!
Excellent advice, and you're absolutely correct.
Good info. I just forwarded to a client who wants to back out of a contract.
This is an excellent argument for buying in today's market. Inflation WIL happen- its just a matter of time...
Thanks Richard!
When there is inflation we move to housing or precious metals.
Richard -
It is a great time to buy. Low rates. Low prices.
If it's a great time to buy, it must be a great time to both sell and buy.
Because the future is what matters....not the past....
equity you only thought you had anyway.
That is so crystal clear, it's hard to see why more current homeowners aren't acting.
Best time to buy things is when no one else wants them. The old saying buy low sell high.
I had a post a few months back called When Inflation Kicks In - it is hard to see how we can avoid inflation. But I don't want to see inflation as a positive. It can be really a disaster. But like you point out, owning real estate can act as a hedge to protect property owners to some extent. Many people are basing their outlook on reacting the the last 5 years instead of looking forward to what is probable 5 years into the future.
I couldn't agree with you more Richard. Now get on that horse saying, "Inflation is coming, inflation is coming!" There is no better time to buy a house than now!
Richard, We have been telling this to buyer clients since the market declined, hedging wealth with asset acquisitions...makes sense especially when you family could own a home rather than rent.
You are soooo right, thank you for the post Richard!
I actually think the 2nd half of this DECADE will see high appreciation due to supply and demand cycles !!!
And it's also a place to call home, which is more valuable than any investment.
Richard, real estate has always been a long term investment. Good point about the impact inflation has on the dollar.
Absolutely and with interest rates so incredibly low, it just makes more sense than ever to buy!@
And how about the available inventory of homes? Today's buyer has so many choices!
Richard, I think a lot of people are finally coming to this realization. With prices so low and other conditions being right, we see many investors coming back to the market.
You nailed it, Richard. Even though there's talk that home prices could drop a little further, I'm not hearing anyone say interest rates will also continue to fall. So now's the time to buy your dream home at a greatly reduced price and at an interest rate you'll brag about in the near future.
In other locations of the world you commonly have "generational" loans. Wouldn't it be ugly if folks all of a sudden had to start taking out 50 and 100 year mortgages?
But the reality is that so many more millions of folks will not be able to endure the inflation as in times past. They will have some really hard decisions to make. And with a gov't that thinks solutions to problems include greater borrowing and redistributing wealth, they obviously will have a "plan" to help those in need for such a ripe opportunity to enlarge the bureaucracy.
Its shaping up to be a redefining time in the history of our nation and the world, when freedom loving people of sound economic principles reject the authority's bubble & burst, borrow-your-way-to-slavery economic model, and restore sanity to our nation's economy with the constitutional republic we were handed from our fathers. They warned against the villany we daily face every day in the form of this debt-strapping, materialism vomiting monster known as fractal reserve banking (i.e. legalized stealing).
Inflation is legalized stealing, because a small group of wealthy individuals control the levers to the value of money by controlling its supply. Remember that verse where Jesus says "don't lay up treasure on earth, where thieves break in and steal." Say Grandpa worked hard all his life, and saved a fortune of 100,000 (in his day). But because of the banksters, his hard earned fortune sitting in savings is stolen from every day thru the magic of inflation. No need to rob Grandpa, the banksters have already legalized stealing without every touching his stash!
Maybe you realize the Federal Reserve is not working for the people, it is a consortium of private banking interests, and its only obligation -- to improve its own bottom line. But if you don't, its time to wake up and smell the foul odor, and get a on your muck boots, and start mucking out 2 party clown candidates working for big slick and not freedom.
Maybe you seem to be sitting pretty for a crisis, but what about your country, your neighbor?
I agree but you also have to be careful about your income to service the debt and to maintain the house and pay the taxes. Wages are usually the last item to go up in a hyperinflation scenario. I would think that you need something like silver or gold on the side in order to make sure that you have something else that goes up in value so that you can pay the mortgage and other expenses even if you don't have a job or you income doesn't go up as fast.
You've definitely hit a chord. It's interesting how difficult it is to buy low and sell high. Now that there is the perfect evironment for buying, with lower prices and historically low interest rates, there are still people waiting in the sidelines. When prices were going up to the stratosphere, you couldn't convince people that it was a great time to sell. There is a lot to following the crowd. I too believe that owning a home is a great hedge for inflation--a comforting one as long as one can afford it.
I preach this everyday. I think this is a great post- people are so concerned about will the home drop $ 10,000 INSTEAD of WOW I have a 4.5% rate and that's going to look great when rates are over 6.5% in a couple of years.
Richard - Truer words were never spoken or posted.... We've always touted this advice and I couldn't agree more... Buy now.. It's a great time to invest in Real Estate
Thanks, Richard, for stating this so clearly and concisely. Re-blogged!
Richard, our neighbors to the north have been experiencing inflation as their economy breaks free from the doldrums. There is no reason to believe that our economy will soon follow suit and real estate is and has always been a great hedge against inflation.
I really like the point about the repay.I had a similar conversation only from a slightly different direction yesterday with a person calling about our rental. In a nut shell, with all of the homeowners who have lost their homes coming into the rental market we now have a vacancy rate that is almost nonexistent, we were pretty low before at 3% generally, but place an ad now and get flooded with calls, simple supply and demand - low availability will mean higher rents and soon.
Great post Richard, now is the time for sure. Real Estate has always been the one true worthwhile investment.
Thanks for the good read.
Patricia
I really enjoyed the topic of the post today Richard. I've re-blogged it.
THanks,
Patricia
I've been preaching this to my investors for years! If you buy four rental properties now, your rent increases as inflation rises, but your mortgage payment won't!
Richard, we keep "hearing" of the possibility of hyperinflation in the years out, but most I talk to still think the government has it all backwards, that with the lack of new jobs, DEFLATION is the thing to worry about. With all the home prices around me plummeting in value with lack of buyers I think deflation is the bigger thing to worry about. Maybe it is only my local economy but that is what I see.
Excellent point, Richard! Yet some buyers seem to be waiting for "better deals", and honestly, I'm not sure what they mean by that....
Richard, I left a previous comment but learned today that the $$$ banks are sitting on is now in excess of two trillion dollars and they are earning virtually nothing from it soooooo...it could mean that more money will finally start flowing to consumers who want to buy!
Richard - Lots of good points here. I love the idea with paying back with inflated dollars.
Right Spot On... chiming in with Todd at #52... Everything takes time, and time flies... but your cost for a loan stays the same. Well said.
Devil's Advocate for a moment here...
The Fed has been keeping interest rates extrememly low for a long time. There are two reasons this worries me... The first is that if rates rise before the economy is really steaming, it could push real estate prices lower again.
Second, with rates at almost zero, there isn't significant inflation... that tells me that there might be a danger of deflation. Paying the loan back with deflated dollars would just not be fun. Of course, the government doesn't want to pay back its loans with deflated dollars, either...
Just sayin'
I'm not sold on the direction money value is going to go.