Prime Edmonton Real Estate - Some believe that inflation and the real estate market are inextricably linked. When inflation rises, home prices usually go up as well. Conversely, when inflation falls, home prices usually fall as well. This simple relationship has a huge impact on the economy as a whole. Others believe that inflation has the opposite effect - raising interest rates and lowering buying power.
So, which one is it? And how much of a difference will this current high inflation make in Edmonton home prices?
An Inflation Backgrounder
Inflation is a general increase in prices and fall in the purchasing value of money. It occurs when there is too much money chasing too few goods. Inflation can be caused by many factors, including: an increase in the money supply, rising costs of production, or an increase in demand for goods and services. When inflation rates are high, it can be difficult for people to afford basic necessities such as food, clothing, and shelter.
Inflation is a measure of the average price level of goods and services in an economy over time. When inflation rises, it means that the cost of living has increased. This can be difficult for people who are already struggling to make ends meet.
In some cases, inflation can be beneficial. For example, it can help to spur economic growth by making it more expensive to produce goods and services. However, too much inflation can be harmful to the economy. It can lead to higher interest rates and make it more difficult for people to borrow money.
It's important to carefully monitor inflation rates so that they don't get too high or too low. If they get too high, it can lead to economic instability. If they get too low, it can lead to deflation, which can also be harmful to the economy.
The current inflation rate across all of Canada - Edmonton included - is nearing historic highs. This means that the average price of goods and services in the city has increased by more over the past year than it has in the foreseeable past.
Inflation Over the Decades in Canada
The highest inflation rates in Canada's history were experienced in the early 1980s. In February of 1981, the inflation rate reached a high of 12.9%, and it remained above 10% for most of the year. The high inflation rates of the early 1980s were largely caused by rising oil prices and Paul Volcker's tight monetary policy in the United States.
In the early 1990s, the inflation rate in Canada dropped sharply, reaching a low of 1.3% in 1993. This was due to a number of factors, including falling oil prices and interest rates, and a recession in the early 1990s. The inflation rate has remained relatively low since then, averaging around 2% per year.
In the 2000s, the inflation rate in Canada was relatively stable, averaging around 2.5% per year. This was due to a number of factors, including relatively stable oil prices and interest rates. The inflation rate reached a high of 3.7% in 2008.
Data from Statistics Canada shows that the inflation rate in Canada was 2.1% in 2016. This is down from 2015, when the inflation rate was 2.4%. Edmonton's inflation rate was slightly higher than the national average in 2016, at 2.3%.
Does Inflation Affect Home Prices?
The inflation rate can have a big impact on the housing market. When inflation is high, it can push up home prices and make it more difficult for people to afford a home. On the other hand, when inflation is low, it can lead to lower home prices and make it easier for people to buy a home.
Right now, Edmonton's housing market is healthy. There is strong demand for housing, and prices are rising at a steady pace. But an increase of prices in goods and services makes a difference everywhere.In addition to affecting the cost of living, inflation also affects the real estate market. Over time, inflation causes home values to rise as well. This means that a family who purchased a home years ago may find that their home is worth significantly more today than it was when they first bought it. Conversely, if you are looking to sell your home in today's market, you may find that it doesn't sell for as much as you were expecting due to the effects of inflation.
The market for houses is affected by different things. Inflation is one of these things. Inflation happens when the cost of goods and services goes up. When this happens, the prices for other things might go up or down. Usually, inflation is not a good thing for the economy. This may have a negative effect on house prices.
The greatest impact of inflation on real estate values is due to interest rates on borrowed money. People may refrain from borrowing as much money when it becomes more expensive to borrow due to rising interest rates, which can have a negative influence on home prices. With high rates, prospective home buyers may decide not to borrow any money or lenders might raise lending criteria. High interest rates cause fewer house purchasers to borrow money, which can lead to lower housing prices.
Homes are usually seen as a good investment when it comes to inflation. This is because the home's value will usually go up with the rate of inflation. Plus, when you buy real estate, you make a down payment of 20 to 30% of the house price. This means that even if the interest rate changes, you won't have to pay as much for your home.
A home's value rises at the rate of inflation times the cost of the property, not by the amount you pay. As a result, if inflation doubled the worth of your house, it would have quadrupled the value of your down payment. You've done even better with a fixed-rate loan since you're paying out less in real terms than before. You are paying less for your mortgage than you did when you took it out.
Inflation can have a significant impact on the cost of building materials. For example, the price of lumber has increased by more than 30% in the past year due to inflation. This can make it more expensive to build a new home or renovate an existing one.
In a strong economy, home values typically don't go down because people can afford to pay more. In a weak or stagnant economy, people might not be able to afford to buy homes as easily. This is because when the economy is bad, salaries usually don't go up as much. There are also less jobs available as families struggle to pay more for the same items.
Both interest rates and inflation impact home prices, but to different degrees. Generally speaking, when interest rates rise, home prices tend to drop as buyers can afford less expensive homes, while during periods of high inflation, home prices tend to rise as people lose buying power. However, these are generalizations and there are always exceptions to the rule. In some cases, for example, a high level of inflation might actually be good for the housing market because it means people have more money to spend. Similarly, during a recession or period of low interest rates, home prices might stay steady or even increase as people look for safe investments. So in short: both interest rates and inflation play a role in determining home prices – it just depends on the particular market and situation.
Safeguarding Against Inflation When Buying or Selling a Home
When buying a home, it's important to safeguard against inflation. This can be done by looking at average home prices in the area and making sure that your budget can handle any potential increases. You can also look into locking in your mortgage rate for a certain period of time, which will help to protect you from any sudden hikes in interest rates.
When it comes time to sell your home, it's also important to safeguard against inflation. In order to ensure that you are getting the most money for your home, you'll want to make sure that the price you're asking for is in line with current market conditions. If you set your price too high, you might find yourself waiting a long time for a buyer, and if you set your price too low, you might not get as much money as you could have. It's also important to keep in mind that the value of your home may change over time, so it's a good idea to periodically check in on the market and see what other homes are selling for. By following these tips, you can be sure that you're getting the best possible deal when it comes time to sell your home.
Inflation and Edmonton Real Estate
In recent years, Edmonton has experienced a large amount of inflation. This has driven up the cost of materials and labour, making it more expensive to build new homes. As a result, many home builders have been forced to increase their prices, which can make it difficult for people to afford a new home. Edmonton's high rate of inflation is likely to continue in the coming years, so we can expect to see even more expensive new homes in the future.
If you're looking for a new home in Edmonton, it's important to be aware of the current market trends. Edmonton has been one of the hottest markets for new homes in recent years, and that trend is expected to continue. With the high cost of living in other major Canadian cities, many people are choosing to move to Edmonton in order to find more affordable housing.
Looking to buy a home in Edmonton? Check out our listings of Edmonton homes for sale. If you're interested in learning more about Edmonton home values, we can help you there too! Just give us a call or send us an email and we'll be happy to provide you with the information you need.Posted by Jerad Cox on