| | How Does Inflation Affect Home Prices?
|  | If you've followed the news lately, you've probably seen quite a bit about inflation. The consumer price index jumped 0.8% in February, bringing the total increase over the last 12 months to 7.9% – this is the largest annual jump in the last 40 years.
So, how does all of this affect the real estate market?
The Inventory Issue
Interest rates have been kept low for so long it's created a bubble for everything and not just the housing market. There's also inflationary pressure on the housing market because of limited inventory. Limited inventory stems from a myriad of problems in the industry.
First, many homeowners aren't putting their houses on the market. This is due to factors like lockdowns, but also the fear they won't be able to find a new home to buy.
There are construction delays due to supply chain bottlenecks as well.
Low inventory means buyers are often having to put in bids well above asking to get properties, creating a frustrating situation, to say the least.
Other Inflationary Effects On Real Estate
There are a few other ways inflation can influence how much you pay for a home.
First, inflation is a reference to a rise in the price of everyday goods. Those everyday goods are used to build homes. If the price of things like lumber and appliances go up, then the builder will pass those additional costs onto the buyer in the form of higher prices.
In some cases, however, inflation can have oppositional effects on real estate. If inflation rises, then theoretically, money should become more expensive to borrow. People borrow less of it, so there are fewer home purchases and that can lead to lower prices.
Real Estate Can Protect You Against Inflation
While real estate can be negatively affected by inflation in the form of higher prices, it can also protect you from its effects.
As home prices go up over time, you're lowering the loan-to-value of your debt. You're simultaneously increasing your equity, but your fixed-rate mortgage payments will stay the same.
If you’re a real estate investor earning income from rental properties, then you're likely going to be able to charge higher rent when inflation is up. You can adjust the rent while the mortgage stays the same.
The relationship between housing and inflation can go in both directions. If you're a buyer right now, inflation isn't good news, but if you own a home, it can be one of the best ways to protect yourself against rising prices. | | | | Disaster Prep: Do You Have a Home Inventory? | | | Disaster can strike anytime, anywhere.
Last year, for instance, aside from experiencing a pandemic, the U.S declared 58 disasters which caused billions of dollars in damage, according to the Federal Emergency Management Agency (FEMA).
 Especially during the aftermath of hurricanes, we learn just how many Americans lack hazard insurance. Those who did have it faced the challenge of trying to figure out how to tally up their losses. It's not easy to recall everything one owns, especially when confronting devastation. Then, there are the other losses a homeowner might face, such as those from theft and fire.
Being prepared will help to avoid delays in receiving an insurance payout should you someday face a disaster.
Dig Out your Homeowner Insurance Policy
If you're like many of us, it's still in the sealed envelope in which it arrived in the mail, shoved into a box or bin of “important papers.”
Get to know exactly what coverage you have and how to submit a claim should the unthinkable happen.
Then, create an inventory of your belongings. Many people choose an old-fashioned checklist (such as the one offered by NYCM Insurance or at Allstate.com), while others use video (narrated with the necessary information), or photographs labeled with the information that insurers require when considering a claim.
Information required by insurers: - Each item's description and the quantity (ex: 2 sterling silver candlesticks)
- Name of the manufacturer (ex: Tiffany & Co.)
- Make/model/serial number
- The date (or estimated date) of purchase
- Where the item was purchased
- The appraised value of each item (or an estimate)
- If you can’t find the written appraisal for any item, jot down the name and contact information of the appraisal company and the date the items were appraised.
Keep your Inventory Safe
It's important to find a safe spot, off-site, to store your inventory. You may choose to store it in the cloud with a backup service or save money by backing up the information to a USB drive and then placing it in a safe deposit box.
Tips from the Experts
- The Insurance Information Institute recommends that you include possessions that are stored somewhere else (like a storage facility) in your inventory.
- Keep all receipts and copies of appraisals with your inventory.
- Keep a count of each item, such as "5 long-sleeve shirts, 7 pairs of sneakers…"
- Break your inventory-taking into chunks. If you try to do too much of it at once, you may become overwhelmed and drop the project.
Finally, run the inventory by your insurance agent to ensure that you have enough coverage. The time to get clear on your insurance coverage is before a disaster strikes. | | | | | | | |
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