How to Overcome
Declining
Purchasing Power with Real Estate
By Rick Tobin
Homeowners are 40 times wealthier than tenants . Real estate is an exceptional hedge against inflation because home values tend to rise at least as high as the published inflation rates .
If you ’ re fortunate to own real estate over years or decades , it ’ s very likely to be the main reason for the bulk of your family ’ s overall net worth . Conversely , tenants will be losing money over time as their rents continue to rise right alongside skyrocketing inflation rates .
Americans in 2023 needed to earn more than $ 11,400 to be able to enjoy the same standard of living as they did in 2021 , thanks to the rapidly declining value of our dollar , according to CBS News .
If your earnings rose by 34 % from January 2020 to October 2023 , the purchasing power of your labor kept pace with higher costs . All of us who aren ' t earning 34 % more since January 2020 have lost ground . It now takes more hours of work to buy groceries and everything else . To offset declining purchase power , real estate ownership may be your best option .
The purchasing power of $ 100,000 in income in January 2020 is only $ 66,000 in purchasing power today ( 34 % reduction ). To keep pace with the rapidly falling purchasing power of the dollar , $ 100,000 in income in January 2020 would need to rise to $ 134,000 in income today or your investments would need to appreciate at the same rate to offset your dollar losses .
Rising Prices for Goods , Services , and Assets
Between 2008 and the first quarter of 2023 , let ’ s review some of the “ official ” government published data for consumer goods , services , and assets from sources , such as the U . S . Bureau of Labor Statistics :
● Hospital services : + 99.8 %
● College tuition : + 64.4 %
● Child care : + 62.1 %
● Medical care : + 57.2 %
● Food and drink : + 52.8 %
● Housing : 48.3 %
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