Just like most had never heard that the company called ANYWHERE owned Sothebys, Coldwell Banker, Better Homes and Gardens, Century 21 and Corcoran till last week, too many people have only recently learned the impact of compounding inflation. Right now inflation is hovering under 3%. That is lower than the 9% peak in June, 2022 but still 50% higher than the 'target rate' and it has remained in this area since the start of 2025.
To place inflation into real-life terms, know the following: If inflation averages 2.5% for the next decade, this is how it will impact prices:
- A dozen eggs that cost $5 today could cost about $6.40 in 10 years.
- A sofa that costs $2,500 today could cost about $3,200 in 10 years.
- A washing machine that costs $1,000 today could cost $1,280 in 10 years.
- A monthly rent that costs $3,000/month today could cost $3,840/month in 10 years.
However, a fixed monthly mortgage payment of $2,500/month (on $417,000 borrowed at 6% fixed for 30-years) today will cost $2,500/month in 10 years. The same. That's a certainty.
- By year 10, that mortgage payment's portion that is paying down principal will have grown from roughly $415 to $797 per month.
- By the end of year 10 you'll have paid $67,000 toward equity.
- And if home values increase by 2.5% annually too, you will have built a total of $213,000 in equity. (The initial home price was a little over $521,000 with 20% down.)
So perhaps this post should be: buy vs. rent vs. inflation.....?
