Living through times of high inflation may put you on the path to homeownership, recent Berkley research suggests.
“…People who have lived through a lot of inflation like to hedge themselves by putting money into a real asset. If this has been your experience, and you’re choosing whether to rent or buy a home, you might opt to buy,” Ulrike Malmendier, Berkeley Haas professor and study co-author, explained.
Inflation’s impact on homebuying behavior holds true in and outside of the U.S. As the study authors noted, countries that experienced greater levels of inflation had higher homeownership rates compared to countries with more financial stability.
Once you become a homeowner, your monthly payment may stay relatively fixed, but your property value is likely to rise. This means that for most of today’s new homeowners, you may see a quicker return on your investment.
In the past year, the average homeowner has gained $14,300 in home equity. The average homeowner also has a net worth of more than 40-times that of a renter, according to the latest available numbers. These numbers simply underscore how homeownership can help build prosperity, providing added protection in times of inflation.
To sum up: If you’re concerned about rising costs, as many consumers are, buying a home might prove to be helpful as a long-term hedge against inflation. As the Fed works to get a handle on inflation, there might also be relief in sight. Cooling inflation could help to calm mortgage rates. If and when mortgage rates drop, homebuying affordability will only get better.