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Buying a house is a good investment if you are looking for a hedge against inflation. It is one of the few tangible assets that tends to hold its value. Since 1990, we observed higher House Price Appreciation (HPA) compared to inflation except for the year 2000 (2.3% versus 2.6%). In 1990 the inflation was 3.0% and the HPA 4.0%, 1.8% in 2010 versus 4.9%, 1.4% and 9.2% respectively in 2020, and finally inflation rose to 6.8% in 2021 and the HPA up to 18.0%.
Actually, the most important factor impacting the housing market is rising mortgage rates. Let us not forget that the low rates that buyers benefited from the last few years were historically unusual.
Also, if a recession comes our way, home price will not necessarily decline. Among the six recessions of the last twenty years, we observed a growth of the Home Price (HP) in four out of six crises: increase of 6.1% in 1980, 3.5% in 1981, 6.6% in 2001, and 6.0% in 2020. Two recessions saw a depreciation of the HP: in 1991 with a loss of 1.9% and of 19.7% in 2008.
The inventory level is rising, according to the latest data, so the experts expect moderate price appreciation and more options for buyers. Note that the housing market is still strong.
Source of information: Keeping Current Matters (KCM).
(Painting: Saint Sauveur, PQ, from Rowena Sandford)
