In today’s ever changing economy, inflation poses a threat to the value of your hard-earned money. To safeguard your financial well-being, homeownership emerges as a powerful tool. Beyond providing comfort and stability, owning a home acts as a shield, preserving wealth and offering protection against rising prices and interest rates. Owning a home allows for potential value appreciation, and provides stable housing costs.
As inflation rates continue to fluctuate, the impact on rent prices becomes increasingly evident. According to the US Bureau of Labor Statistics, rent expenses were the ‘largest contributor’ to the already swelling inflation rates back in March of this year. While consumers paid less for groceries and gasoline (CPI 5%), housing expenses rose 8% over the same period. When inflation rises, rent prices tend to follow. Renters bear the brunt of high inflation periods, paying more money out of pocket, while enduring higher living expenses.
Homeowners not only escape these higher rent expenses, but also build home equity over time. Even with rising housing prices in the Florida real estate market, home owners are seeing their properties rise in value, preserving the purchasing power of the initial investment. Not only will buying help you begin to build equity, a fixed mortgage rate can stabilize your monthly housing costs for the long-term even while other life expenses continue to rise.
While purchasing a home can be a smart maneuver against inflation, it is essential for buyers to consider their long-term plans for residing in the house. One aspect to evaluate is the impact of closing costs, which can significantly affect the affordability in the long run. These expenses typically range from 2% to 6% of the purchase price and must be factored into the overall budget. Additionally, when selling the property, closing costs can amount to approximately 1% to 3% of the sale price. Failing to accumulate sufficient equity in the home to cover these costs may result in financial losses upon sale.
Another concern arises when buyers purchase homes above the appraised value, leading to a situation where they initially owe more on the mortgage than the property’s worth. This predicament can be particularly problematic if the intention is to sell the home before sufficient appreciation occurs. By considering the potential costs and ensuring sufficient equity accrual, homeowners can make informed decisions that align with their goal and minimize risk of facing unfavorable financial circumstances.
The Michelle Thomas Team can help you navigate the process of purchasing a home, ensuring you make a sound investment. We provide market insights, connect you with relevant professionals like home inspectors and lenders, negotiate on your behalf, and handle all the paperwork to make your buying process as smooth as possible. Whether you’re looking for an investment property or a primary residence, we can help you find the right property that suits your budget and needs.