The U.S. real estate market continues to improve thanks to greater confidence in the housing market, and with the upward movement comes more cash flowing for investing in real estate. There are a number of different ways to invest in real estate depending on what you, the investor, are looking for. It’s a highly customizable investment area that attracts investors from all walks of life.
We had previously reported on a Gallup Poll from 2017 in which gold and stock investing had taken a backseat to real estate for a desirable long-term investment. According to new data from 2019 and 2020, investing in real estate is still very much the top pick for investors. The latest Bankrate survey finds that 31% of Americans think real estate is the best way to invest money that they won’t be able to touch for a decade, compared to just 20% of Americans who chose stocks.
Here is a deeper look at the nation’s opinion on real estate.
Results from the Bankrate survey show that the Silent Generation, Baby Boomers and Gen X all consider real estate to be the most desirable investment – but it’s Millennials who truly have their eyes on the real estate market.
It may seem like an odd match, considering Millennials are less likely to buy homes and property compared to older generations. However, the generation of avocado toast, with its unique financial habits and penchant for alternative banking, is much less keen on the stock market.
Are stocks out of fashion? Not necessarily. Those earning $50,000 or greater are more likely to invest in the stock market as a long-term investment. Conversely, low-income respondents prefer cash investments, like bonds and CDs. Nevertheless, all income levels preferred real estate as their first choice.
As Jeffrey Jones states in a Gallup report:
“Stock ownership remains down from where it was before the recession, perhaps because the financial crisis and resulting decline in stock values made it clear to would-be investors the downside to investing in the stock market. Even though more than a decade has passed, non-investors may remember the cratering of stock values and not want to take the risk.”
Despite the popularity of real estate, the Gallup report also reveals an interesting caveat that complicates the narrative. Gallup respondents chose real estate over stocks when investing in a primary home, but respondents were more likely to choose stocks over an investment in a secondary property or commercial property. For many Americans, “investing in real estate” does not necessarily mean buying a multi-family property to rent, or investing in REITs. It simply means increasing their equity by buying a home.
In the 2017 Gallup survey, the West Coast had been most optimistic about real estate investments overall. At 46%, residents of the West were more likely to consider real estate as the best long-term investment.
Today, we see people investing in real estate in smaller, up and coming American cities, such as Austin, Nashville, Seattle, Orlando and Boston. Investing in these markets is more popular as people look away from New York and LA (this is not true, however, for global, institutional investors who continue to see capital appreciation in major coastal cities).
Non-institutional investors should look for real estate opportunities in cities with growing populations and ample employment. Mortgage and interest rates are also important factors in growing real estate markets. And finally, investors should be aware of major events and trends impacting real estate. One of those trends is climate change and the rise of ESG (environmental, social and governance) investing. Where Americans choose to invest may be impacted by rising sea levels and extreme weather. This will certainly affect those investing in real estate in the coming decades.
Many people turn to the relative stability of real estate to balance their portfolio. But real estate is still comes with risks, and though it has generally outperformed stocks, one must still adapt to changes in the real estate market.
After the collapse of the housing market in 2008-09, many potential buyers may be hesitant to make their cash vulnerable or illiquid while waiting out a recession. Some areas ripe for real estate investments simply have more attraction for a particular investor’s interest. Certain sectors may be more stable than others (residential property being less vulnerable than retail), and so on.
In the end, the ebb and flow of the real estate market makes it a good choice for investors who can “float” through the ups and downs of the market cycles and know when to exit and move on.
[Editor’s Note: To learn more about this and related topics, you may want to attend the following webinars: Investing in Commercial Real Estate and Investing in Residential & Multi-Family Real Estate. This is an updated version of an article originally published on October 27, 2017.]
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