Real Estate Term of the Day: Inflation
INFLATION – a loss in the purchasing power of money; an increase in the general price level. Generally measured by the Consumer Price Index, published by the Bureau of Labor Statistics (Barron’s Dictionary of Real Estate Terms)
Real estate is considered a hedge against inflation because it tends to be long-lasting and holds its value in real terms. As the value of the dollar drops, real estate tends to command more dollars.
Below is a graph that shows the home values in Denver vs the inflation rate in the US. This graph shows that since 1988, housing prices in Metro Denver have more than tripled. It also shows that housing in Metro Denver has consistently outpaced that national inflation rate average over the longer term.