Inflation has been affecting the costs of our everyday needs. Prices have increased for things like gas and food. Inflation is measured using the Consumer Price Index (CPI), which measures the average change in the price of a basket of goods and services paid by urban consumers, and is predicted to be the dominant trend for the time being.
Investors traditionally look towards real estate as a hedge against inflation. Soon-to-be homeowners on the other hand are suffering from the negative impact of inflation, one of which is the growing underbuilding gap in the U.S. that has reached 5.5 million in the past two decades. Besides the housing supply crisis, the supply and demand crisis caused by the COVID-19 pandemic helped drive inflation rates as the national housing inventory reached its lowest level and construction materials rose in price.
The supply and demand issues are predicted to cause further problems in the near future, including rising interest rates. Ideally, we hope to see demand for goods and services as well as supply chains returning to normal levels as the effects of the pandemic subside. However, continuously rising building costs and demand are more highly expected.
The future of the housing market remains uncertain, but this uncertainty is one of the reasons real estate investments might be something to consider. Investments in assets such as commercial real estate (CRE) and real estate investment trusts (REITs) could be beneficial in the long run due to their resilience against inflation and ability to provide a good return on investment. Even metaverse is offering real estate investment opportunities.
Amidst economic volatility, will you take a chance with real estate?