You are probably feeling the effects of high inflation on a daily basis, with prices for things like food and gasoline soaring. If you’re a renter, you’re likely to experience this more often as rents continue to rise. Given these rising costs and the uncertainty of a potential recession, you may be wondering if it still makes sense to buy a home. The short answer is yes. Here’s why.
Homeownership actually shields you from the rising costs inflation brings.
Freddie Mac explains how:
“Not only will buying today help you begin to build equity, a fixed-rate mortgage can stabilize your monthly housing costs for the long-term even while other life expenses continue to rise – as has been the case the past few years.”
Unlike rent, which tends to increase over time, fixed-rate mortgage payments are predictable over the life of the mortgage, typically 15 to 30 years. And stabilizing housing costs is especially important when almost everything else is on the rise.
An alternative to owning a home is renting, but rents tend to fluctuate with inflation. This means that as inflation rises, so do monthly rent payments (see chart below).
A fixed-rate mortgage allows you to protect yourself from future rent hikes. With inflation still high, when your rental agreement comes up for renewal, your property manager may decide to increase your payments to offset the impact of inflation. Maybe that’s why, according to a recent survey, 73% of property managers plan to raise rents over the next two years.
Having your largest monthly expense remain stable in a time of economic uncertainty is a major perk of homeownership. If you continue to rent, you don’t have that same benefit and aren’t as protected from rising costs.