In an annual Gallup poll, Americans chose real estate as the best long-term investment. And this is not the first time - Real estate has been a Top Investment for the past eight years (see graph below):
Even in 2022, while Stocks have not performed well, real estate remains very strong. What's scary, though, is that we don't know how long it will take for stocks to recover from this recent downturn. But if we look at the past data:
Real estate historically has outperformed the S&P 500 on 20- and 30-year rolling periods.
Real estate offers diversification and can act as a hedge against inflation.
Given the housing shortage, real estate will likely provide a better return compared to today's stock market volatility.
Real estate is a great way for stock investors to branch out.
You can get into real estate by owning physical properties or REITs.
Real estate gives you a backup income stream when stock values plummet.
Real estate is an incredible hedge against inflation. As the cost for goods and services increases, so does real estate, often far faster than the rate of inflation. According to the Case-Shiller Home Price Index for the top 20 cities in the United States, home prices have grown over 17% year to date. If you compare that to today's inflation rate of 7.5% and the S&P 500 year-to-date return of -8.5%, it's obvious why real estate is a good investment right now.
Real estate provides:
An ability to generate passive income
Provide a tax shelter
Build equity
Offer diversification.
Since real estate is driven by supply and demand, it's imperative that investors understand what is driving demand in each industry before investing. Multifamily housing is booming as demand for rental real estate grows at an even faster rate than home prices. Industrial real estate is another industry that is experiencing robust growth fueled by the rise of e-commerce and the need for manufacturing solutions closer to home. So overall, real estate remains very much in demand.
Bottom Line: Even though Rising mortgage rates and economic uncertainty have some people questioning the market; the hedge against inflation, tax benefits, passive invome, home ownership, and tons of other benefits make real estate an ideal long-term investment.
