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How buying a home can hedge against inflation | Smart Change: Personal Finance

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“This 4% level is above the last average, but it’s definitely holding up,” says Foucher. Inflation in 2023 and beyond will be between 2% and 2.5%, as the Federal Reserve wants that.

Final Thoughts for Homebuyers

Although buying a home can help protect a homeowner’s money from inflation, buyers still need to consider how long they plan to stay in the home.

Since closing costs are very expensive, buyers need to consider these costs before buying a home as they affect your ability to afford that home in the long run. When you buy a home, you will pay between 2% to 6% of the purchase price in it closing costs. And when you sell the home, closing costs can range from 1% to 3% of the sale price.

If you don’t raise enough equity in your home to cover these costs, you could end up losing money from the sale. Similarly, some people buy homes above appraised value, which means they start their new home upside down on their mortgage – they owe more than the property is worth. This is not a good situation to be in if you don’t plan on staying home long enough to appreciate catching up.

Often, the only thing that can help you build equity is time. Of course, there are unexpected events that cause the housing market to boom, and you can see the value of your home much more quickly than the average appreciation rate, which is usually between 3% and 5%.

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