How Inflation Effects Residential Real Estate

[Polina Ryshakov]

 Signs of inflation are everywhere. The sticker shock is real: From grocery stores to gas stations, you can't escape it.

And there are good arguments on both sides of the ‘will inflation stay or go?' debate. In fact, June marks the third straight month of core inflation surge, making those levels the highest they’ve been since 1992.

But what is in store for Real estate? Historically residential real estate has proved to be a haven during periods of high inflation. Real estate has the ability to earn income through rental payments that can be adjusted as prices go up — a boon for investors or homeowners who choose to rent. As inflation numbers go up and prices for other needs go up, fixed monthly mortgage payments for the previously purchased property remain the same. Not only that, but real estate has the ability to earn income through rental payments that can be adjusted as prices go up — a boon for investors or homeowners who choose to rent. That’s why single-family rental operators are deploying billions of dollars to buy rentals. The best and simplest concept to understand is hotels. They have nightly lease terms. If inflation rises, hotels can immediately adjust rates. While yearly rent can’t be adjusted quite as quickly as a night’s hotel room, it does respond to market forces.