What is it, and how will it affect you?
Inflation is a hot topic amongst economists these days. Inflation and real estate? Even hotter. As the economic recovery continues, there will be some big changes coming. Be ready with some tips on what to expect in the not-too-distant future.
Interest Rates and Inflation
A big part of inflation involves rising interest rates. To protect banks from getting shorted, interest rates will rise and they will offer a lower volume of loans. This leads to higher borrowing costs and additional costs associated with building when working with new construction. All of this sounds daunting, but for existing homeowners, a market with inflation can be a positive one, as we will see below.
Renters
Another significant change in a market with inflation is the cost of renting. Renters will find that their payments generally increase in times of economic prosperity; from their perspective, costs of living will increase. From the landlord’s point of view, this is a positive development. Higher rents tend to lead to higher profits, and along with them, more potential investment in properties. The increased investment spawns a boom in real estate and provides the opportunity for more growth in the market.
Investment and You
Finally, the investment business is alive and well during times of inflation. The stock market is notorious for being bullish when economic prospects are trending in a positive direction, and REITs, or Real Estate Investment Trusts, are wildly successful in times such as these. These trusts follow market demands, and as mentioned previously, demand runs wild in economic booms. Higher demands lead to higher returns, and can net investors 3% or more in residual income.
Summary
Inflation and real estate may seem like a daunting prospect. Rest assured that although it is a mixed bag depending on your living status, real estate is very much a hot market. If you choose to invest, you can reap various rewards, or if you decide to rent out your property, you can find a lucrative market ready to demand your space. No matter what your situation is, you will be ready to face the situation head on! Check out our tips on when and why to remodel your kitchen for some extra facts!