Can Investing in Real Estate Help Hedge Against Inflation?

Stocks, cryptocurrency, options, CDs, ETFs, corporate bonds, index funds, mutual funds…the list goes on. How do you know what to invest in as the economic landscape shifts so quickly? Experts say now may be a good time to invest in real estate as a hedge against many of the challenging forces at play in the current economic landscape (eg., inflation, rising interest rates, materials cost increases, supply chain issues).

With interest rates at decade lows and inflations skyrocketing, the housing market is attractive security and sector. Real estate provides a physical asset-backed investment amid uncertain times. Real estate is indeed a “real asset”.

For buyers, mortgage rates are at near all time lows. The Federal Reserve plans to hike interest rates 3 more times this year, so buying sooner rather than later is better in theory, because with each incremental interest rate increase, the purchasing power of a buyer diminishes. In simple terms, low-interest rates help you lock in a better monthly payment for the long term, and afford more home today. Rising interest rates reduce the ticket price of the home one can afford.

For sellers, the market remains attractive for anyone considering selling a home given low inventory which provides more strength to set a higher listing price amid scarcity, not to mention amid inflationary times which are driving up all prices and costs. In Charleston specifically, demand is also at a high point with immigration patterns from other more expensive markets that others are fleeing to come to the Lowcountry.

Amid inflationary times, rising costs affect most all things, not just real estate. However real estate, or housing more specifically, is a necessity. It can be a prudent decision to invest in an asset that provides the long term benefit of a necessity while locking in a lower and fixed payment today (i.e. by locking in a fixed rate long term mortgage).