Inflation Can Help And Hurt
Inflation is a term that often has a negative connotation for stock market beginners. We hear the word and it makes us shudder. No one wants to pay more today for a product that we bought yesterday for a lower price. However, inflation is not always bad. In real estate, inflation can increase the value of our home while we pay the same mortgage payment.
The following example shows how inflation can actually be helpful.
Rob and Mary bought a little house in 1991 for fifty eight thousand dollars. Their payments, including taxes and insurance were four hundred forty dollars each month.
In 2005, the value of their home had increased two hundred nine thousand dollars. Their payments have also increased due to an increase in the homes assessed value and insurance rates. Their total payment in 2005 is five hundred and forty dollars.
In this case, inflation has been helpful to Rob and Mary. Their home is now worth more than when they bought it and the home payment has not made a significant increase.
Bob and Marie list the property for sale, but it does not immediately sell. The market for real-estate quickly turns sour and they watch the value of their home drop. Eventually it is appraised at one hundred thirty thousand dollars and they decide to wait to sell. Although the payment remains constant, they are no longer seeing the benefits of inflation.
Runaway inflation is hurtful for most people. For those on fixed incomes, it is especially difficult. However, some inflation helps our lives to flow smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23159
The following example shows how inflation can actually be helpful.
Rob and Mary bought a little house in 1991 for fifty eight thousand dollars. Their payments, including taxes and insurance were four hundred forty dollars each month.
In 2005, the value of their home had increased two hundred nine thousand dollars. Their payments have also increased due to an increase in the homes assessed value and insurance rates. Their total payment in 2005 is five hundred and forty dollars.
In this case, inflation has been helpful to Rob and Mary. Their home is now worth more than when they bought it and the home payment has not made a significant increase.
Bob and Marie list the property for sale, but it does not immediately sell. The market for real-estate quickly turns sour and they watch the value of their home drop. Eventually it is appraised at one hundred thirty thousand dollars and they decide to wait to sell. Although the payment remains constant, they are no longer seeing the benefits of inflation.
Runaway inflation is hurtful for most people. For those on fixed incomes, it is especially difficult. However, some inflation helps our lives to flow smoothly.
What we really desire is to see balanced inflation. The prices of things grow gradually along with our paycheck as well as the value of our property. - 23159
posted by X - Men @ 11:51 AM
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