A house can not avoid inflation, but it can hedge against inflation. Inflation can’t be avoidable, it stays with us as long as the society has liquidity needs. Like the current economy, Fed is creating inflation by reducing short term borrowing rate, it potentially stir up bigger inflation pressure going forward. More liguidity in financial market, more cash, it will all end up with reduced buying power for the money.

Buying a house can hedge against inflation only if you can hold it for the long term, at an affordable interest payment. This benefit can only become a reality to you over a long term horizon. For the short term the effect is not obvious. House price doesn’t not automatically adjust with inflation rate immediately. In many occasions throughout history, housing price may go down while inflation may go up. The relationship is not close correlated for the short term. However, this disconnection will be cured over time. As long as the owner of the house can hold for more than a cycle, probably more than 8 years, then he/she would trully benefit from its hedging power. Therefore, buying a house is not like buying a hedge fund or setting up a hedging position in financial market with instant protective payout.

House itself is not a value producing vehicle. Then, you may ask, where is the earning for investor coming from? Simple, it will come from investor’s using time and other people’s money to leverage long term inflation. The wealth is coming out of maintaining today’s buying power and use that in the future, basically making inflation from a woe to a friend.