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        <title>Huntsville, Al Real Estate Blog</title>
        <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/tags/inflation/</link>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/inflations-surprising-impact-homeowners-vs-renters--new-bank-of-america-study.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/inflations-surprising-impact-homeowners-vs-renters--new-bank-of-america-study.html</link>
        <author>info@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Inflation's Surprising Impact: Homeowners vs. Renters | New Bank of America Study</title>
    <description> <![CDATA[ 
Inflation's Surprising Impact: Homeowners vs. Renters





Bank of America Study Insights on Inflation


New data from Bank of America shows that inflation is affecting renters more than homeowners. One of the key findings of a study from Bank of America is that renters are spending less on expenses outside of housing compared to homeowners. This doesn't come as a surprise, considering that rents continue to increase nationwide. This will obviously have a more significant impact on renters than on homeowners, who typically have a fixed-rate mortgage. One of the advantageous aspects of our country's housing market is the availability of 15-year and 30-year fixed-rate mortgages.


This allows homeowners to weather periods of high inflation without being as severely impacted, primarily because a significant portion of most people's expenses are allocated to housing. Homeowners are not experiencing the same level of impact as renters, who find themselves with less disposable income for dining out and engaging in other activities.


Rising Rent vs. Fixed-Rate Mortgage


Finding that renters are spending less money outside of housing than homeowners are, is no surprise because renters are having to adjust their budgets for rising rents. In an apartment, your initial year's rent might be $1,500, but by the second year, it's likely to increase. It could rise to $1,600 initially, then further to $1,750 the subsequent year, then another $1,900 with no end in sight. Unfortunately, there isn’t an end to rent increases because there's not an end in sight to inflation. The printing of money is expected to continue, following the targets set by the Federal Reserve which is currently wanting a 2 inflation rate. With that, rent prices will continue to rise. However, if homeowners have a 30-year fixed-rate mortgage and their payment starts at $1,500, it will stay the same for the whole term or only change a little. You may have some slight increases with insurance or taxes going up over the years, but for the most part, your payment is staying low and staying fixed allowing you to ride out those periods of high inflation.


Renters Are Significantly Cost Burdened


Another factor that's particularly affecting renters at the moment is that, until recently, we were experiencing a relatively low level of rent inflation. It was only at 2 back in 2021, but it suddenly jumped to 8.8 in March 2023, according to the Consumer Price Index. That's why renters are being so burdened by inflation right now, they're getting hit in multiple ways and they're having to find ways to cut expenses and spending to be able to keep up with escalating rent hikes.


On top of all that, 49 of renters are what you call cost-burdened. One out of two of the renters in this nation are spending more than 30 of their income towards housing. Staying at or below 30 is considered a healthy balance between income and housing.


The challenge is that almost half of the people in this country are burdened by housing costs, and the situation actually gets worse from there. Of the 21.6 million households being cost-burdened, over half of those households (11.6 million) are facing severe cost burdens. This means they are spending 50 or more of their income towards housing, preventing them from saving money to eventually own a home and escape the cycle of constantly pursuing higher rent payments.


Benefits of the Fixed-Rate Mortgage


Homeowners are experiencing inflation a whole lot differently than renters are, all because of this key concept of the 30-year fixed-rate mortgage. This is a feature that sets our country apart from the rest of the world, where such extended fixed-rate mortgages are not commonly available. It's really the power to unlock wealth in four key ways:


Fixed Monthly Payment


Homeowners benefit from a fixed-rate mortgage, ensuring consistent monthly payments throughout the loan term without inflation-related hikes, leading to better budgeting. In contrast, renters often face annual rent increases due to inflation.


Principal Savings Account


A part of each mortgage payment reduces your loan amount, leading to full repayment in 15 or 30 years based on the length of the loan. It functions like a forced savings account you can tap into when selling or refinancing the home.


Leveraged Appreciation


Leveraged appreciation allows you to benefit from the entire value of your home's appreciation, not just your down payment. For example, with a 20 down payment and a 5 home value increase, you gain 25, or even a 10 down payment could lead to a 50 return.


Tax Benefits


Through tax savings, you can deduct a portion of your mortgage payment, potentially reducing the amount of taxes paid and leading to a refund. Adjusting your W-4 can further decrease monthly tax payments, boosting your monthly cash flow.


 


If you're wanting to learn more about how a 30-year fixed-rate mortgage can help you get off of this inflation rollercoaster and help you start building wealth for yourself, give us a call at 256-333-MOVE or contact us here


 



 ]]> </description>
    <pubDate>Fri, 11 Aug 2023 12:12:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/secure-your-future-beat-inflation-with-real-estate--huntsville-al-real-estate-news.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/secure-your-future-beat-inflation-with-real-estate--huntsville-al-real-estate-news.html</link>
        <author>info@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Secure Your Future: Beat Inflation With Real Estate | Huntsville, AL Real Estate News</title>
    <description> <![CDATA[ 
Secure Your Future: Beat Inflation With Real Estate





“You will own nothing and be happy.” Owning nothing and being happy sounds like a crazy quote, but it seems to be coming to fruition in everyday life and you don't want to allow this to happen to you as an individual or as a family. Consider simple things we used to own, like VCRs and DVDs for movies. Nowadays, we merely rent a streaming service from Netflix or a movie from Amazon. These seemingly insignificant changes are contributing to more substantial shifts, like the declining rate of home ownership.


In a world where owning nothing seems like a radical concept, it's essential to consider the implications it might have on your future. As we witness shifts in everyday life, such as the declining rate of home ownership, it's crucial to protect your family against inflation and its potential consequences. Don't get caught in the renter trap; find out how to pave the way for a unique and secure lifestyle for you and your family.


Homeownership Hits A 50-Year Low


Homeownership is at a 50-year low in this country and continues to decline; it's not likely to increase any time soon. A lot of that has to do with the effects of what the Fed is doing. The Fed lowered interest rates when we had a record low supply, which set the housing market on fire, and then they doubled those interest rates almost overnight.


That created a trap for many would-be sellers – this mortgage rate lockdown effect, where a lot of potential home sellers have interest rates in the high 2 or low 3 range, and they're simply not motivated enough to sell their homes. As a result, this is reducing the supply available for first-time homebuyers to enter the marketplace.


Decline in World Reserve Currency &amp; Inflation


Another trend to watch as we shift towards becoming more of a renter-type nation is the decline of the US dollar as a world reserve currency. We experienced an 8 decline in 2022. Why is this important? It contributes to artificially low prices and low borrowing costs here in the US. As the US dollar's status as a reserve currency diminishes, it will result in reduced access to capital. This, in turn, will lead to higher borrowing costs, elevated mortgage rates for first-time homebuyers, and potentially a decline in stock market valuations. Consequently, this could diminish the wealth effect and ownership rates across the US.


The other big headline that's affecting this trend towards Renter Nation is that we're inflating our money away. Inflation is nothing that's new but inflation at the recent elevated levels is something that we haven't seen since the 1980s. Inflation truly is a thief to people that are saving and those trying to save and purchase big assets, like their first home. Looking at the stats for the last 52 years, we find that we've lost 98 of our purchasing power in this country.


Secure Your Future: Beat Inflation, Own Real Estate


You might be asking, what can I do to protect myself and my family against this inflation? Something that typically keeps pace with inflation is hard assets such as gold or silver. However, if you want to get ahead of inflation, consider looking into real estate. Real estate acts as an inflation multiplier and enables you to not only beat inflation but also significantly increase your wealth during high inflationary periods.


Owning stuff does not ultimately create happiness, but the inverse of that of not owning stuff definitely doesn't create happiness either. True wealth is created through homeownership, homeowners have 40x the net worth of renters. 


If you're a renter residing in these high-end apartment complexes, here's what will occur: the rents will continue to increase year after year. However, if you lack the margin of safety to save up for a down payment on homeownership, you'll find yourself trapped in the status of a renter, unable to own a home or create wealth in this country. Therefore, making sacrifices today will pave the way for you to lead a unique lifestyle in the future, as Dave Ramsey says.


If you're looking into how you get out of this trap of being a renter and become a homeowner. Shoot us an email at moving@mattcurtisrealestate.com or give us a call today at (256) 333-MOVE.


 



 ]]> </description>
    <pubDate>Wed, 19 Jul 2023 13:26:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-alabama-housing-market-news-does-raising-interest-rates-help-inflation.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/huntsville-alabama-housing-market-news-does-raising-interest-rates-help-inflation.html</link>
        <author>info@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Does Raising Interest Rates Help Inflation? | Huntsville, Alabama Housing Market News</title>
    <description> <![CDATA[ 
Does Raising Interest Rates Help Inflation? | Huntsville, Alabama Housing Market News





Interest rates are at the highest levels that they've been in 20 years and inflation is at the highest levels that we've seen since the 1980s. The Fed continues to raise interest rates to combat inflation but does raising interest rates actually impact and lower inflation?


Economics comes down to supply and demand. Most purchasers of big-ticket items such as boats, cars, and homes are also borrowers. Raising interest rates affects the demand for those products because the purchasers are likely to borrow less as a result.. The ‘wealth effect’ is another factor that affects demand. As interest rates rise, that typically has a negative impact on the stock market as people's stock portfolios and 401ks are worth less which also makes them less likely to borrow or purchase goods.





There are a few challenges when it comes to the strategy of raising interest rates to decrease inflation:


1) Housing is Factored Into Inflation 





In fact, it's the largest expense for most Americans whether it be your mortgage or your rent so raising interest rates only increases this expense. For example, a $300,000 loan on a 30-year fixed mortgage of 3 was $1,265 a month. Compare that to rates in the 7 range, that loan is now a $1,996 a month payment which is a 58 increase. Not only do mortgages rise during periods of high-interest rates, but it also helps justify raising rents because rents need to be somewhat in line with mortgages to help make that balanced.


2) Supply &amp; Demand Imbalance





The other challenge to decreasing inflation through raising interest rates is how it artificially manipulates demand, thus affecting supply. As you raise interest rates, that artificially manipulates the demand for housing in the economy. As interest rates rise, demand shrinks. But as interest rates shrink back down, you're going to have that demand get elevated once again. Since we already have a supply imbalance in the economy, we're not fixing that. We're actually making it worse.


We have a 5.5 million home deficit, but we're making it worse by raising interest rates. We're scaring off builders from building new construction and they're actually slowing down with these heightened interest rates. The next time interest rates do come back down in the next year or two, we're going to possibly have a more extreme imbalance in supply and demand than we do now.


We're going to have that demand once again with lower interest rates but the supply may be even more imbalanced with fewer homes currently being built. By raising interest rates, the Fed is artificially manipulating the demand in this country but not affecting the main source of challenge which is the 5.5 million home deficit.


Matt’s Advice





If you can buy a home in this market, take advantage of these more favorable buyer conditions because we're not likely to experience that as interest rates start to decrease again. By taking advantage of the more favorable buyer conditions now, you can then look to refinance as rates go back down.



 ]]> </description>
    <pubDate>Fri, 14 Oct 2022 11:53:00 -0500</pubDate>
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    <guid>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/inflation-is-legalized-counterfeiting.html</guid>
    <link>https://www.mattcurtisrealestate.com/HuntsvilleAlRealEstateBlog/inflation-is-legalized-counterfeiting.html</link>
        <author>info@mattcurtisrealestate.com (Matt Curtis)</author>
        <title>Inflation is Legalized Counterfeiting</title>
    <description> <![CDATA[ 
Inflation is Legalized Counterfeiting







According to a recent MarketWatch article, inflation hit 8.5 in March which is the highest amount in 40 years. This raises the question, “Is Inflation Legalized Counterfeiting?” Also, how do you survive and even thrive during a period of high inflation?





Inflation is Legalized Counterfeiting 


Inflation is legalized counterfeiting and it's bad for consumers. Inflation penalizes savers, with 8.5 inflation you lose $8,500 a year in spending power on $100,000 in savings. Inflation is also a hidden tax. When the government decides to spend more money, they found that the country would revolt if the government imposed a flat 8.5 tax on all savings.


However, they can get away with it by just printing the money they want to spend. As a side note, the world would probably be a little bit safer if governments had to raise taxes for wars versus taxing the people through higher inflation. 


 


How to Survive a High Inflationary Period





You start with buying assets. Our fiat currency, not backed by any commodity such as gold or silver, is getting devalued by the day and a great place to start when buying assets is real estate because you can buy it with leverage. For most real estate investments, you can pay as little as 20 down. That means you're borrowing 80 of the value. So if you have 8.5 inflation at a 20 rate, you would actually get 42.5 return on your investment.





The Get Rich Education Podcast also reported that since 1994, home prices have increased for all seven times that interest rates have risen 1 or more. And guess what just happened? Interest rates have risen by more than 1. Zillow also recently reported that Americans on average earn more from home price appreciation in 2021 than they did from their job.





So there's three benefits of buying real estate during inflationary environments: 1) Values rise during inflationary periods. 2) You have a fixed debt that's now worth less due to these new inflated dollars. 3) Cash flow increases because you have fixed debt and the rent increase is due to inflation, which is another reason why you don't want to be a renter in this market.





So with high inflation and the benefits of buying real estate during high inflationary environments, is there any wonder why on average, one out of four homes is being purchased by investors right now? What are your questions on inflation and how it relates to real estate?
 ]]> </description>
    <pubDate>Mon, 02 May 2022 13:26:00 -0500</pubDate>
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