Real Estate investment as hedge against inflation

Gold Key, weighing one kilogram is used to acc...

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If you have fears of inflation but believe Gold is over priced.  You may want to consider Real Estate.  I have believed this for a long time, real estate has historically paced inflation.

I found this article from the Danville Patch that I thought illustrated this very well:

Using Zimbabwe as an example, where inflation was once 98 percent, if you could purchase a bottle of water for one penny on August 1, by August 31, it would cost $10.6 million.

And bringing the point home, for all of us that are saving money so that we can one day retire comfortably — imagine if your life savings turned out to be only enough for the next day’s groceries?

We’ve had low inflation, as high as 6 percent in the early 90’s, but Habib warned that it can creep up on us before we know it and can be hard to contain. 

However, he is optimistic, and thinks we can contain it if we see it coming.

But for people looking to hedge against inflation, Habib suggests real estate and gold are the two best bets. Historically, he points out, gold leads the way and real estate follows. Habib sees the recent rise in gold pointing to a strong real estate market to come.

Especially, considering the fact that most people stay in their homes for 13 years — that’s the average. Sure, everyone wants to buy at the “bottom of the market,” but the exact bottom will be hard to gauge.

If it’s near the bottom, is it better to buy on the way down or on the way up? Habib makes the point that, you can get a better deal on the way down, when sellers are fearful, and there’s more inventory. Once prices begin to rise, the seller’s fear turns to greed: they want more for their home and there are fewer homes to choose from.

Habib stated that we are close to bottom and already there in some markets. He reminded us, sitting at the Roundhill Country Club, that 30 years ago, the homes in the neighborhood sold for around $37,000.

Historically, real estate appreciates at about 6 percent a year — but this is not along a straight line. There are ups and downs along the way.

Consider how long you plan to keep the home. If the answer is six months or a year, well then, this may not be the time to buy. But if you plan to stay in the home for the average of 13 years, Habib convinced me that this is a great time to buy.

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2 responses to “Real Estate investment as hedge against inflation

  1. Pingback: Tools of the Financial Trade: Investing in Real Estate Makes Sense « Investment Strategies, Inc.

  2. Pingback: Twin Cities Rental Market is booming: Plymouth Park Place Apts Sold for $54.7million | craigkamman

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