How does Inflation affect housing prices?
Inflation is here and will be for a few years. Historically speaking, real estate is the number one hedge against inflation.
The graph of Home Price Appreciation vs. Consumer Price Increase over the Decades shows us that for each decade, as inflation increases, housing home price appreciation also increases. So a lot of people, a lot of investors, tend to take their money out of paper assets and put them into real estate. This is what has fueled a lot of the buyer demand.
The reason there's a significant rise in Home Price Appreciation and inflation this year is because of the current lack of demand and the increase in interest rates that is coming. Another reason that housing is such a good hedge against inflation is because you lock in a 30-year rate, a 30-year payment that'll stay the same.
Inflation raises housing prices so you get that investment back in order of equity. If you are not a homeowner, now is the time to really try and purchase your first property, even if it's not the one you're living in, to purchase a rental property because you would like to ride this wave of momentum that's coming right now versus have it work against you as a renter. Rents are going to go up they're going to continue to go up with inflation. We're going to see an increase in housing prices over the next couple of years.
Source: NAR, CoreLogic, Consumer Price Index