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Stimulus Spurs Inflation - Protect Yourself By Buying A Home

By Kate Ford

Republish: EasyPublish™ Published: 21Mar2009 Word count: 565 Viewed: 332 time(s) Get Free Content For Your Site

"Don't wait on buying a home because there will never be a better time in your life than right now," said my friend who happened to be a real estate agent.

My first thought was yeah right! With the market in such a depressed state you are just desperate to make a sale.

That was 1982. He was both right and wrong.

He was right because the little 3 bedroom, 1 bath house I bought in 1982 for $100,000 is now worth $450,000 even at today's recession prices. That is an incredible increase of 350%.

But he was also wrong. Are you wondering why?

He was wrong because this current economic crisis has created an environment that may never be duplicated in another 100 years.

Here is what I mean.

Have you been watching the news? Are you reading today's headlines?

Congress and the President are spending trillions of dollars to stimulate the economy out of recession. The goal of the stimulus bill is to ward off a depression. Many Americans are asking this question. Where is the money for economic recovery coming from?

Money for the stimulus package comes from you and me in different ways. The federal government has to borrow the money from its citizens by selling debt in the form of US Treasuries and Bonds. In addition local and state governments raise taxes and charge higher fees. But when the government borrows money by going into debt, inflation is triggered. When state and local governments increase fees such as sales tax, or gas tax, the cost of living rises.

Inflation means that the cost of items we enjoy, use and need every day will become more expensive. For example the price of renting a house is never getting cheaper.

So how do we protect ourselves from what is inevitable? One way is by buying a home and locking in monthly house payments at current mortgage interest rates.

Right now renting may seem cheaper than buying a home but over time rents are going to increase partly because of demand and partly because the dollar is going to be worth less. We are already seeing an increase in rental demand due to mortgage foreclosures. The decrease in the value of the dollar will come later.

Here in lies a big mistake that many people are going to make. Thinking short term.

Renting versus buying a home seems like a better deal right now. But if you want to protect yourself and your family from the effects of inflation, you want to start thinking long term instead.

This is the point.

Even if the rate of inflation remains fairly tame, rents are still going to rise. In addition current mortgage interest rates are not going to remain at historical lows forever. The Federal Reserve will have to manipulate interest rates higher in order to starve the coming inflation. Because the price of buying a home has hit near bottom, real estate prices too will rise. Five years from now, homes will be worth more than they are today and mortgage lending rates most likely will be higher also.

Do you want to make sure your family is protected from the coming inflation? Even better, don't you want to take advantage of it? The best way is by buying a home.

Here is my prediction. There will never be a better opportunity during your lifetime for buying a home than right now.

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