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Another theory on inflation & Boston condo for sale prices

Boston Condos for Sale 2024


Another theory on inflation & Boston condo for sale prices

If you’re looking for prices to ease or to go down, I fell your pain. However, if might just be a pipe dream. Watch this inflation video for more details.


Another theory on inflation & Boston condo for sale prices

You’re probably feeling the impact of high inflation every day as prices have gone up on groceries, gas, and more. If you’re a renter, you’re likely experiencing it a lot as your rent continues to rise. Between all of those elevated costs and uncertainty about a potential recession, you may be wondering if it still makes sense to buy a home today. The short answer is – it does. Here’s why. 

Inflation is at a 40-year high. 10 tips from the pros on how to invest and  save - MarketWatch

Homeownership actually shields you from the rising costs inflation brings.

Freddie Mac explains how: 

“Not only will buying today help you begin to build equity, a fixed-rate mortgage can stabilize your monthly housing costs for the long-term even while other life expenses continue to rise – as has been the case the past few years.”

Unlike rents, which tend to rise with time, a fixed-rate mortgage payment is predictable over the life of the mortgage (typically 15 to 30 years). And, when the cost of most everything else is rising, keeping your housing payment stable is especially important.

The alternative to homeownership is renting – and rents tend to move alongside inflation. That means as inflation goes up, your monthly rent payments tend to go up, too (see graph below):

20230524 rents increase with inflation most years

A fixed-rate mortgage allows you to protect yourself from future rent hikes. With inflation still high, when your rental agreement comes up for renewal, your property manager may decide to increase your payments to offset the impact of inflation. Maybe that’s why, according to a recent survey, 73% of property managers plan to raise rents over the next two years.

 Having your largest monthly expense remain stable in a time of economic uncertainty is a major perk of homeownership. If you continue to rent, you don’t have that same benefit and aren’t as protected from rising costs.

Boston Condos and the Bottom Line

A stable housing payment is especially important in times of high inflation. Let’s connect so you can learn more and start your journey to homeownership today.

The CFO's Guide to Using Inflation Indicators for Business ...

Updated: Boston Real Estate Blog 2023


Another theory on inflation & Boston condo for sale prices

Rising inflation is being blamed on the high commodity and energy prices triggered by supply chain problems and the war in Ukraine, but one investor argues there’s another factor at play – millennials. 

In an interview on CNBC’s Squawk Box Europe, Smead Capital Management’s chief investment officer Bill Smead said one of the problems facing the U.S. economy today is that there are “too many people with too much money” who are chasing “too few goods”. 

High Rise Boston condo for sale prices and millennials

In the U.S., Smead explained, there is an estimated 92 million millennials, most of whom are aged between 27 and 42 years old. He said the last time people in this age bracket made up the bulk of consumers, we saw something that was termed “wolverine inflation”. That was when 75 million baby boomers replaced 44 million silent generation consumers back in the 1970s, causing inflation that was extremely difficult for policymakers to put an end to. 

“We have in the United States a whole lot of people, (aged) 27 to 42, who postponed homebuying, car buying, for about seven years later than most generations,” he said. “But in the past two years they’ve all entered the party together, and this is just the beginning of a 10-to-12-year time period where there are about 50% more people that are wanting these things than there were in the prior group.”

The Federal Reserve can take certain actions, like tightening credit standards, but it cannot do anything to reduce the number of people wanting to buy Boston condos for sale.

The argument seems especially valid in the real estate market, where growing numbers of millennials are intent on becoming homeowners at a time when affordable Boston condos are harder to come by than they have been in living memory. Chronic Boston condominium inventory shortages are one of the main factors behind the rocketing home price increases over the past two years, with many markets seeing more buyers than available homes. 

There will of course be lots of millennials who disagree with the idea that they have tons of cash and are purchasing assets willy-nilly. Last month, CNBC found in its latest millionaire survey that millennials are three times more likely to be cutting back on big purchases than their counterparts in the baby boomer generation, for instance. There are also plenty of millennials who say that fear of getting into debt is preventing them from buying homes.

That said, millennials do make up the largest chunk of the homebuyer market by generation and are also the largest generation in the U.S. in terms of population, so Smead’s argument might have some merit.

Source: CNBC Squawk Box

Updated: Boston Real Estate Blog 2024

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