Home Ownership as a Hedge against Inflation.

Buying versus Renting.

Is it financially wise to buy a home? Or easier to continue renting?

In sum, there are several financial benefits to home ownership.

According to Biggerpockets.com, these benefits include building your equity, tax advantages, not paying rent, passive income earned from rental properties, and so forth.

Another enormous benefit of homeownership is security. Finally, buying a home provides a hedge against inflation.

Inflation Rates.

Since 1913, the annual inflation rate in the U.S. has averaged around 3.1%. As the cost of goods and services rise, so do the costs of buying a home. Currently, mortgage interest rates are the lowest to date. If you were to purchase a home today, you could lock in a fixed long-term interest rate, to buy a financial asset that promises to rise in value over time (while the interest rate will not).

Implications.

This means that while others pay rising rents and home prices year after year, your monthly payments will be less expensive, comparatively. Thus, allowing you the freedom to invest in your home, invest in other assets, or put money toward other goals. The first year you own your home will be the most expensive, yet will get easier year after year.

Conclusion.

A home as a hedge against inflation is currently critical. The pandemic is the primary reason that interest rates plummeted. Yet, now that the economy is improving, interest rates will continue to rise. Thus, purchasing a home will only become more expensive in the future.