People who experience periods of high inflation are more likely to purchase a home, according to a new study to be published in The Journal of Finance by the University of California San Diego’s Rady School of Management. According to the research conducted by co-authors Dr. Alex Steiny Wellsjo and Dr. Ulrike Malmendier, many homeowners buy homes “because they are motivated to protect themselves from possible future price hikes.”
“We think one reason people choose to buy instead of rent is because they are worried about future inflation, which may drive up both rent and house prices,” said Alex Steiny Wellsjo, assistant professor of economics and strategy at the Rady School. “People who have lived through high inflation in the past may expect higher inflation in the future, causing them to wish they were a homeowner. This is especially true if they can finance with a fixed-rate mortgage, further protecting them from future inflation.”
Wellsjo added that the implications of the high inflation people are currently experiencing around the world will have a lasting impact on housing markets.
“Our paper suggests that cohorts living through the current inflationary period will have a higher demand for housing for years to come,” she said.
