Inflation, Taxes, Cap Rate: Basic Concepts Homeowners Should Keep in Mind

by Mark Wellborn


The Washington Post had an excellent article in this past Saturday’s edition that discusses some economic concepts that should be kept in mind when considering a home purchase.

The piece was written by Neil Irwin who covers the national economy and Federal Reserve for The Post, and also purchased a condo in Logan Circle back in 2008.

If you are considering a home purchase, the article is the closest thing we have seen to required reading in awhile (next to UrbanTurf). It can be read in its entirety here, but below are a few highlights:

  • Inflation — Irwin writes that rising inflation is the home buyer’s “friend.” His reasoning is that historically home prices rise only slightly faster than inflation, and therefore “the rate of inflation plays a major role in determining the value of your home when you go to sell, even as the amount you owe on the mortgage is fixed.”
  • Taxes — It is fairly well known that home owners can benefit from a variety of tax deductions. However, Irwin writes that the uncertainty of what the tax code will look like after tax cuts expire at the beginning of next year makes it difficult for those considering a home purchase to plan for what their tax benefits will be 5-10 years out. Irwin recommends using a program like TurboTax that can help calculate federal and state income tax liability based on mortgage interest and property tax.
  • Cap Rate — Irwin explains the role of capitalization rates in a home purchase and how they can be used to compare homes from an investment perspective. This was the most interesting part of the article in our humble opinion, but too complex to outline in detail in this post. Cap rates are a common benchmark used in the commercial real estate world, and the rule of thumb is the higher the cap rate the better.

See other articles related to: taxes, inflation, home prices, home buying, cap rates

This article originally published at https://dc.urbanturf.com/articles/blog/inflation_taxes_cap_rate/2466


  1. ??? said at 3:21 pm on Monday September 13, 2010:

    “..the rule of thumb is the higher the cap rate the better.”

  1. SimonF said at 3:38 pm on Monday September 13, 2010:

    Kudos for highlighting this article. I read it this weekend and learned a lot. These are all important factors that homebuyers should conider prior to buying.

Comments are closed.

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!

Northern Virginia

Profiles of 14 neighborhoods across Northern Virginia

Looking to Give People A Reason to Stay Past 6pm
Happily Straddling the Line Between City and Suburb
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
Crystal City
Turning Lemons into Lemonade
Lyon Village
Developing An Air of Exclusivity?
Hitting Its Growth Spurt
An Urban Village Hitting Its Stride
Del Ray
Virginia’s Small Town Near the Big City
Eisenhower Avenue
The Vibrancy Might Take a Few Years
The Quiet Neighborhood By the Beltway
Old Town
Mayberry By The Potomac
132 Commerical-Free Acres
Downtown Falls Church
Staying the Same in the Midst of Change
Tysons Corner
Radical Change Could Be On The Way

See more Northern Virginia »


Profiles of 14 neighborhoods in suburban Maryland

Small-Town Living in the State Capital
Bedroom Community Gets Buzzing Cache
Cabin John
In With The New While Maintaining the Old
Chevy Chase
Affluence, Green Lawns and Pricey Homes
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
A Suburb on Steroids
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
Takoma Park
More Than a Little Bit Quirky
A Foodie Magnet on the Verge of Change
Capitol Heights
Kudzu, Front Porches and Crime
Glass Half Full or Half Empty?
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
National Harbor
A Development Rises Next to the Potomac
Riverdale Park
A Town Looking For Its Identity

See more Maryland »

Northwest DC

30+ neighborhood profiles for the city's biggest quadrant

16th Street Heights
DC's Sleeper Neighborhood
Where (Almost) Everyone Knows Your Name
AU Park
One of DC’s Last Frontiers Before the Suburbs
DC’s Northern Neighborhood on the Cusp
DC’s 535 House Neighborhood
Cathedral Heights
Do You Know Where That Is?
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
Cleveland Park
Coming Back After A Rough Year
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
An Island of Serenity East of the Park
Dupont Circle
The Best of DC (For a Price)
Foggy Bottom & West End
Where the Institutional Meets the International
Forest Hills
Ambassadors and Adventurous Architecture
Foxhall Village
350 Homes Just West of Georgetown
Friendship Heights
A Shopping Mecca With a Few Places to Live
History, Hoyas and H&M
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
A Posh View From Embassy Row
LeDroit Park
A Quiet Enclave in the Middle of the City
Logan Circle
Trendy Now, But Not By Accident
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
Mount Vernon Triangle
From Seedy to Sought-After
The Long, Skinny Neighborhood at the City’s Northwest Edge
Park View
It’s Not Petworth
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
Getting a Vibrancy of Its Own
The Duke’s Former Stomping Ground
Shepherd Park
DC’s Garden of Diversity
Spring Valley
A Suburb With a DC Zip Code
Not To Be Confused With Takoma Park
Not Quite Like Its Neighbors
U Street Corridor
The Difference a Decade Makes
Woodley Park
Deceptively Residential
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents

See more Northwest DC »

Southwest DC

The little quadrant that could

Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come

See more Southwest DC »

Northeast DC

Profiles of 10 neighborhoods in NE

New Development Could Shake Up Pastoral Peace
A Little Bit of Country Just Inside the District’s Borders
Not to Be Confused With Bloomingdale
Fort Totten
Five Years Could Make a Big Difference
H Street
A Place To Party, and To Settle Down
The Northeast Neighborhood That Few Know About
Michigan Park
A Newsletter-On-Your-Doorstep Community
Evolving from a Brand to a Neighborhood
Ripe for Investment Right About Now
The Difference 5 Years Makes
Big Houses, A Dusty Commercial Strip and Potential

See more Northeast DC »

Southeast DC

6 neighborhoods from Capitol Hill to East of the River

Capitol Riverfront
Still Growing
Hill East
Capitol Hill’s Lesser Known Neighbor
Congress Heights
Gradually Rising
Notable for Its Neighborliness
Historic Anacostia
Future Promise Breeds Cautious Optimism
Eastern Market
A More European Way of Living

See more Southeast DC »

Upcoming Seminars ▾