Owning Home vs. Renting in Inflationary Period

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songbird's picture
songbird
Status: Member (Offline)
Joined: Apr 16 2008
Posts: 23
Owning Home vs. Renting in Inflationary Period

  My question -  is it  bettter in an inflationary period to be paying a mortgage at a good fixed rate than be renting, if your rent would keep being raised?  I know over the last few years the idea of renting and waiting for house prices to drop made sense, but in an inflationary period wouldn''t you find yourself with big rent increases?

In that scenario, wouldn't house prices be rising too, making it difficult to buy a house and get out of the high rent situation?

MountainBiker's picture
MountainBiker
Status: Member (Offline)
Joined: Nov 30 2009
Posts: 14
Re: Owning Home vs. Renting in Inflationary Period

Absolutely owning a home with a fixed rate mortgage is where you want to be in an inflationary period.  The value of the home rises, and your wages rise (usually) but your debt load and payments stays fixed.  Conversely rents will rise as would the price to buy a home.  This is why I bought my first home back in the 70's when I was only 24 and it is why my son followed my advice and bought a house with a fixed rate mortgage earlier this year at age 25.  He'll be way ahead of the game come high inflation as a result of the unfolding debt bomb.

One very important caveat is that buying a home could backfire big time if your employment is not secure in these uncertain times.  Additionally one should never buy more house than you can afford in the here and now.  If anything the aging of the baby boomers in combination with peak oil on the horizon is going to result in modestly sized  homes being more in demand than McMansions. 

 

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