Quite a few unprecedented events are happening globally, slowly creeping into our daily lives. The uncertainty brought about by COVID-19’s spread has made people rethink their priorities and reevaluate their needs. Holding on to what you have seems to be a wise thing to do. Adding to this, we are experiencing our most significant inflation rate increase in the US since the seventies and real estate prices are taking a hit.
Inflation Hits Close to Home
Real Estate is an excellent example of how the pricing of different goods and services affects the end product. For example, during construction, prices of services, materials, and appliances, to name a few, contribute to the overall cost of a home. On the one hand, the suppliers of these items are also affected by the supply chain with such issues as higher manufacturing costs, higher transportation costs, and the list goes on.
For goods to be made and supplied to a standard, the cost is passed on to the consumer. In the end, homeowners either delay their purchase of a house or hold on to their current home. Increasing COVID’s threat and increasing lockdowns will make homeowners want to stay home more often and only make necessary purchases.
Supply chain issues brought about by job cuts and transportation bottlenecks due to lockdowns here and abroad affect the timing of deliveries and work completion.
This creates a shortage in the market for homes to purchase because owners are not putting them up for sale. So hang on to what you have and wait for the market to get better is the name of the game.
Factors Influence Borrowing Rates
One immediate effect is the increase in borrowing costs among the factors defining inflation. Essentially, you get less for more due to inflation—you will have to spend more to get what you want. So with that in mind, people borrow less until market conditions improve.
Therefore, sellers will offer homes for sale at lower prices just to get inventory moving. Still, buyers are also holding on to their money, so transactions are stalled. So if you want to buy now, prepare to pay more.
It Isn’t All Bad News
On the bright side, inflation can also protect you from the effects of higher prices in other areas. For example, suppose you’re on a fixed-rate mortgage– in that case, since the rate stays the same, your equity increases, thus speeding up home ownership while your payment remains the same.
If you are into renting properties, this gives you the flexibility to offer lower rates to clients, keep the business going, and increase prices as the economy improves. Since your mortgage rate remains the same, you can focus on profit over time.
It may not be an excellent time to buy a home yet, but it is your best defense against rising prices if you already own one.
Preparing for the Unexpected
As we are increasingly subjected to wild and destructive weather, it has opened our eyes to the possibility of the once impossible. You only need to check the news for the devastation that hurricanes and tornadoes pack and the economic impact on families.
While everything is bright and sunny, now is an excellent time to review your home insurance policy and see how best it can help. Increasing your coverage might be a good thing to consider. Still, an easier one—taking an inventory of things you own and their value is something you can do right away.
For insurers to service a claim, they will need a list of items you own and their corresponding values to affect a payout. Such information as the item’s description, quantity, and value can make things easier to assess when the unthinkable happens. There are many ways to record this—written or through digital media—what is important is you have proof.
It would be a good habit to list down important information about valuable items soon after purchase so you won’t get overwhelmed by too much inventory. This can also help prevent omitting otherwise important things when it is too late. Check with your insurer about the information they need to make claims.
Keep Information Safe
All your effort will be for naught if you lose all data when you need it; put your lists in a fire-proof safe or an indestructible container. If you choose to go digital, have it stored in a separate hard drive or a cloud for easy retrieval. Backups are your key to making life a little easier after a major disaster.
Clarify and Verify Before it’s too Late
Preppers have a saying: “Better to have and not need it than need it and not have it.” If you don’t have insurance coverage yet, it would be in your best interest to get one now. Insurance is there for a reason and has helped countless people get back on their feet. It can get more expensive to rebuild lost property than pay for coverage in the long run.
If you are already insured, spend time sitting down and discussing your coverage and its requirements with your agent. Make sure your payments are on time, and their conditions are clear to you. It’s never too late until it’s too late.