From WSJopinion: Houses, like most physical assets, retain their real value during high inflation and have done far better than most such assets, writes Kotlikoff
Journal Editorial Report: Paul Gigot interviews former Trump economics chief Kevin Hassett. Images: Getty Images Composite: Mark KellyMortgage interest rates have been rising at their fastest pace in years. Last April, the 30-year fixed mortgage rate was 3.2%. Today it’s 5%, the highest in more than a decade. “We’ve never seen a time where mortgage rates have risen as quickly as they have and the market hasn’t cooled off,” real-estate economist Ralph McLaughlinthe Journal.
But if you’re holding back from buying a house because of the rise in rates, consider that inflation is up even more. A year ago it was running at 2.6% on a year-over-year basis . Today, this retrospective annual inflation measure is 8.5%. We haven’t seen inflation this high since the early 1980s. If inflation continues at this rate, you’re better off borrowing money today at 5% and paying it back a year from now with dollars that have depreciated by 8.5%.
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