The Best Long-Term Investment
In an annual Gallup poll, Americans chose real estate as the best long-term investment, and it is not the first time it’s topped the list either. Real estate has been on a winning streak for the past eight years, consistently gaining traction as the best long-term investment. Why is this the case? Increasing inflation rates and the benefits of buying a home, compared to the risk and rate of return of investing in stocks, contributes to Americans’ view of differing investments.
Investing and Inflation
With inflation reaching its highest level in 40 years, it’s more important than ever to understand the financial benefits of homeownership. Rising inflation means prices are increasing across the board. That includes goods, services, housing costs, and more. But when you purchase your home, you lock in your monthly housing payments, effectively shielding yourself from increasing housing payments. James Royal, Senior Wealth Management Reporter of Bankrate, explains, “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.” Your home can also be worth more in the long-run, with appreciation increasing as more money enters the housing market. Now is especially an important time to consider investing due to mortgage rates remaining at historically low numbers – and these rates will not stay low forever.
Renting vs. Buying
If you are a renter, you do not have the benefit of a steady payment, and you aren’t shielded from rises in your living expenses, especially rising rents. As a homeowner, your house is an asset that typically increases in value over time, even during inflation. That’s because, as prices rise, so does the value of your home. This concept makes buying a home a great hedge during periods of high inflation. As Natalie Campisis, Forbes Advisor Staff, explains, “Tangible assets like real estate get more valuable over time, which makes buying a home a good way to spend your money during inflationary times.” Housing truly is a strong investment, especially when inflation is high. When you lock in a mortgage payment, you’re shielding from housing cost increases, and you own an asset that has the potential to increase in value.
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