“While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still rising. You are undoubtedly feeling the pinch on your wallet at the gas pump or the grocery store, but that news may also leave you wondering: should I still buy a home right now?”
This was the opening line in a recent Keeping Current Matters post. They were talking about buying a home during an inflation period, but the wisdom also applies to those looking to add an ADU. Many of our customers ask, “should I add an ADU right now?”
The answer is yes, even if you are part of the large majority leveraging financing to complete the project.
The majority of ADU customers will use financing and,
“Inflation will have a strong influence on where mortgage rates go in the months ahead. . . . Whenever inflation finally starts to ease, so will mortgage rates — but even then, home prices are still subject to demand and very tight supply.”
Actually- everything related to housing is going up right now because we are in the midst of a housing crisis that will take years to resolve. This means rents are also likely to rise. This means you could build your ADU and ride the tide of rising rents.
Also, no one is calling for homes to lose value. As Selma Hepp, Deputy Chief Economist at CoreLogic, says:
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
In a nutshell, your ADU plans are still a smart idea. Rising costs are just one factor when adding an ADU to your yard. Rising rents, your home’s appreciation., and the flexibility of more space are all reasons to move forward now.
And, remember, your loan only lasts until you refinance or pay it off. Your ADU is with you for as long as you live in your home.
Bottom Line
Adding an ADU is one of the best decisions you can make in an inflationary economy. You get the added security of rental income that keeps pace with the rise in living expenses, should you need it.
ADU Financing Options
Are you wondering how you will get the money to build your ADU? We wrote an article for that. Check here for ADU Financing Options including the CalHFA $40,000 ADU grant, and here to find out how Retirees Can Get Financing For ADU.
