Since the beginning of the pandemic, inflation has skyrocketed higher than we’ve seen in decades. With global closures occurring, there has been a steady decline in goods being imported which has created a massive supply chain blockage. With so many people looking to buy products, and the products being unavailable, the demand increases and so does inflation.
Explaining the Rise in Inflation
This rise in inflation is even affecting things like cars and homes. With production slowing down while the demand for goods continues to rise, the cost of basic building materials has been affected dramatically. The price for materials such as wood and steel which have increased in price over 70% since the beginning of the pandemic. Along with the rising cost of supplies, there is also a striking labor shortage which means it’s taking more time to make homes and costs more to pay the workers. All of these elements lead to the prices of homes rising.
For people who have already invested in real estate, the rise in cost of homes is not necessarily a bad thing. The pandemic has created a seller’s market with over 6 million homes being sold in November of 2021. Investors have traditionally used real estate to create a hedge against inflation due to the fact that rental income increases with property values and property values increase with inflation. While inflation rises, mortgage rates remain fixed so homeowners or other real estate investors don’t need to worry about their payments being increased.
Now that the pandemic is taking a turn, it is expected that the supply chain blockages will resolve and production could recover. The cost of building supplies, however, are still on the rise and are expected to remain that way for the time being. The sellers market will also continue in the next few years, but with a few changes. Experts have predicted that in 2022 there will be a 6.6% increase in home sales and a nearly 3% increase in appreciation.
In uncertain times like these it is important to know the facts about rising inflation and the different strategies available to protect your finances. With real estate being one of the best investments you can make to protect yourself against inflation, look into different opportunities in your area. Stay informed and learn more about how inflation can be used to hedge against inflation and how the pandemic through investing in the real estate industry.