Inflation appears to be at our doorstep and the best way to control your housing costs may be to buy now, even in this crazy market. Fixing your housing costs with a fixed rate mortgage at historic lows will be better than risking rent increases in the coming years.
If you have done anything during the pandemic and shelter-in-place, you probably have looked at homes online. Even those people who own and like where they live have considered selling, but many renters have thought about buying. While there is more inventory than a year ago, there are even more buyers than a year ago. Basic supply and demand has driven home prices in the Bay Area up an average of 22% since January 1. So while it’s a great time to sell, it begs the question, is it really a good time to buy? Is it worth it to buy, at what feels like the top of the market while taking risks on property investigations and appraisals? Well, that is up to the individual buyer. But we offer one more reason that you might not have considered: buying a home with a fixed rate mortgage can be a great way to combat the effects of inflation.
In May, the Consumer Price Index (CPI) showed a 5% increase in the cost of goods over the preceding 12 months, the largest increase since 2008. The cost of homes is both indicative and partially the cause of that increase. In the short run, the rental market has softened, but the long term housing shortage in the bay area will keep rents increasing with inflation. The best way to protect your housing expenses from inflation is to buy with a fixed rate mortgage. While you will need to budget for the cost of home ownership repairs, your monthly costs will be knowable and largely fixed. If inflation is indeed coming, and there are indicators that we are seeing the beginning of it, buying a home may very well be your best choice.