The Relationship Between Real Estate and Inflation
Here’s how inflation affects the real estate market and vice versa.
We’ve been hearing a lot of questions about inflation and what it has to do with the real estate market. Will prices drop? Will the market crash? We’re bringing you the facts about how inflation affects real estate and how it doesn’t.
Inflation is the rate at which the cost of goods increases over time. Experts say they like to see around 2% inflation each year based on the Consumer Price Index, or CPI. Just like inflation of goods, real estate values appreciate over time. The average is somewhere around 3% to 4%; right away, we see that real estate values tend to outpace inflation.
Now let’s talk about the CPI in 2022. It has increased 6.8% from last year, which is abnormally high. During the same time frame, housing values have increased by 21% in Metro Atlanta. Home values are far outpacing inflation, even at this very high rate.
" If you aren’t a must-move buyer, this may not be the best market for you."
If you’re thinking about selling your home, know that prices will continue to rise. This is still one of the best seller’s markets we’ve ever seen. However, one thing I’m keeping an eye on is how inflation will affect other things. Many of us are already seeing this at the gas pump. Buyers must shave some money off their budget as a result, so will they cut back on homes or somewhere else?
This is a must-move market, so only move right now if it's truly necessary. If you must move, then you can take advantage of today’s low interest rates and know that you’re buying in one of the fastest-growing housing markets we’ve ever seen. Chances are that when you close in 30 to 45 days, your house will be worth more than what you bought it for.
If you aren’t a must-move buyer, this is probably not the market for you. This is the time to wait it out, keep renting, or stay in your home. When inflation normalizes, you can be ready to attack the market.
If you have any questions about inflation, the market, or real estate in general, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.