Real Estate Prices and Inflation

For the past 12 months, the year over year change in median home price has averaged an increase of 17%. People say things like, “this real estate market is crazy!” and I often get the question, “when are prices going to come back down?” Over the years, I’ve had buyer clients say they are going to wait the market out until prices come back down and the “bubble bursts.” That did actually happen back in 2008-2011 during the Great Recession, but its not likely to happen again soon. For those who waited to buy, that strategy has not worked out very well.

Inflation is real. The US Bureau of Labor Statistics reported this month that the Consumer Price Index (CPI), also known as inflation rate is up 6.2% over the past 12 months and 0.9% in October alone. Real estate prices are up along with the prices of everything else.

When I was first learning about real estate, I remember hearing people much smarter than me say that “real estate is a hedge against inflation.” I’m not sure I fully grasped what they meant, but it sounded good so we bought real estate. We are witnessing the effects of that mantra this year. The prices of goods are rising right before us but real estate is keeping up (and then some). If you own real estate, then you have likely been watching your net worth rise over the past few years and so the thought of rising prices isn’t likely to be personally alarming.

If you subtract the 6.2% inflation rate from the 17% increase in average home price in the Charlotte area, you still get a very healthy 10% return on investment. This year we have actually experienced how money in a mattress (or a savings account) is becoming less and less valuable as the cost of goods rise. Where else can you keep your money so that it doesn’t lose its value?

Aren’t you glad you own real estate? And if you don’t, well its not too late! Interest rates are still at record lows so you can lock in a low interest rate and still protect your investments against inflation. Make your move!

This week we’ll send out our monthly E-Newsletter with the real estate stats for Mecklenburg County comparing single family home stats in Oct to the prior month and the same month last year. Here’s a sneak peak:

  • Home sales are are down 5% from last month and 9% from last year.
  • Average sales price is up 2% from last month and 12% from last year.
  • Median sales price is even with last month, but up 17% from last year.
  • Average price per square foot is up 1% from last month and 19% from last year.
  • Average time on market is up 25% from last month, but down 32% from last year.
  • Pending home sales are down 1% from last month and 3% from last year.
  • Housing supply is down 7% from last month and 16% from last year.
  • Mortgage rates at 2.9% are even with last month and up only slightly from last year.
  • Average house payment is up 2% from last month and 13% from last year.

For a look at the complete data check out our Stats Page Here.

Photo by Piero Regnante on Unsplash

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