There’s a dirty, nine-letter word cropping up all over the media these days: inflation. Although we as individuals can’t do much to control inflation, there are some things we can do to hedge our bets against its effects. As it happens, investing in real estate is one of the best ways to do that. So how do you hedge against inflation by using real estate?

For one thing, you have to stay in the market. Renters right now are probably feeling the effects of high rents. If you’re a renter who’s shopping for a home—and you should be—interest rates are still extremely low. Low rates will allow you to purchase a property for less than what your rent is, even if the properties are similar.

"Investing in real estate is one of the best ways to hedge against inflation."

Many people also wonder if the prices of homes aren’t already over-inflated. Data shows that, on average, property evaluations increase by 4% year over year. Obviously, the years between 2008 and 2012 were less than stellar, but since then, the gaps left by those years have filled in with all the equity lost during the crash. Now, we can conservatively say that we’re on the right track with where our evaluations should be.

Rest assured that the demand for housing has never been higher. Last year, a little over a million new builds were added to the market; we need at least that many homes to be added each year to keep up with demand. We’re currently on a backlog of about 1.9 million homes. Based on last year’s numbers, it would take us 18 years to catch up with the demand.

In the end, understand that inflation isn’t the worst thing in the world for real estate. Even as the price of gas, food, and supplies increases, so too do property values. If you have any questions about how you can use real estate as a hedge against inflation or anything else to do with the housing market, don’t hesitate to reach out to us. We’d love to hear from you.