In Part 1 of this series on Real Estate and Inflation, we discussed how monetary inflation creates price inflation which affects materials costs, creates a shift into rentals and a surge in foreclosures. But on the flip side, being a commodity itself, home ownership can provide protection against inflation and through the use of a mortgage allows you to pay off an appreciating asset with depreciating dollars. This time we will look at a few more effects of Inflation on the average home buyer. In a period of high inflation, a dollar's value decreases rapidly. On average, a 2 percent inflation rate means that what costs $1 in 2017 would cost roughly $1.02 in 2018. Although inflation is … [Read more...]
Inflation on a 30 Year Mortgage
I recently received the following question: In 1970 I purchased a nice house in the suburbs of Albany, New York for $54,500. Although the price of the home today is well above the inflation rate, I was wondering how the inflated dollars I'm spending on the last few payments has changed over the past 30 years. The mortgage payment has been consistent but I'm paying in inflated dollars, I just don't know how much the value of each dollar has declined in purchasing power. How would I calculate that figure?- John … [Read more...]
