When considering the value of their houses, most homeowners do not account for inflation, and instead, they rely solely on the prices of their properties. Perhaps they do rightly so. Homeowners tend to put the value of their properties as their foremost priority. Thus, they neglect the inflation hike and assume that their abodes will make them richer.
But here is the catch: If you pay high prices for your daily life essentials like gas, fuel, mortgage, and your cost of living is higher than your income, your abode alone will not make you richer. It does not matter how pricey your home is – if the current inflation rate is higher, your abode can not simply make you richer.
However, this calculation is not as simple as it looks. Essentially, the inflation rate and the housing market do not go hand in hand. If the inflation rate goes up, chances are that the values of properties will go down. The calculation of the 2021 inflation and housing rate from Forbes is a prime example.
According to the analysis, the inflation rate went high to 25% in 2021. On the other hand, the value of properties and homes went up to 120%. As a result, U.S. homeowners made 100% profit. Thus, the visuals looked for U.S. homeowners.
Inflation is at All-time High Rate in the U.S. – Which is A Ringing Bell for the U.S. Housing Market
But now, the situation is alarmingly different than in 2021. As we approach the mid of 2022, the United States is already plunged into an all-time inflation peak. Different reports make it apparent that the current price hike in the U.S. is unprecedented. “Today, the inflation is at an all-time high rate. It is the highest price that American consumers are paying in the last 5 decades,” says a report from Statista. Think about the fuel and grocery prices. $6 per gallon gas price is the highest rate that U.S. consumers are paying. It was never seen in the last 50 years.
Thus, this entails that the value of U.S. homes is falling down. Even if it does not go down, it is not likely to do any good to the homeowners given the fact that inflation is soaring.
Nevertheless, the AEI anticipates that in the upcoming months, the value of U.S. homes is very likely to remain the same (as it is today) or will decrease by the end of 2022. “It is obvious that the values of houses are largely determined by the locality. But inflation is the main factor,” argues the director of AEI. Furthermore, he goes on to say that they do not see the potential of the values of homes going up in the near future.