Gallup recently released reports indicating that the majority of Americans believe that real estate is the best long-term investment. The esteemed polling organization determined 34% of Americans surveyed choose real estate as the best investment for the fifth straight year.
What has changed?
Danielle Bulla Isenhour is a Real Estate Professional with Wainwright Real Estate and a Real Estate Investor with Coastal Property Doctors, LLC in the Hampton Roads area of Virginia. “Rent prices are going up and it’s becoming cheaper to buy. Many new homeowners are sick of moving and can purchase a nicer place for less money per month,” said Isenhour. “Lately, I’ve had several young buyers that are excited to have the freedom to do what they want to the house and make it a home. The house will eventually be paid off, or the equity can be used to help the homeowner accomplish a variety of goals.”
In 2008 – 2009, the stock market took a devastating hit downward – housing prices declined until the mid-2000s. During this time, gold was valued by Americans as the better investment. A smaller percentage of Americans named traditional savings accounts and CDs or bonds as the reasonable investment, but interest rates have been at historical lows – making it difficult for a large number of consumers to see sustainable viability within these investments. Lower income Americans see a bigger return on real estate and gold.
Gallup reported the percentage selecting stocks increases with income, from 19% among those earning less than $35,000 annually to 33% among those earning $75,000 or more. Therefore, it’s not surprising that more Americans own their home versus own stocks – 63% versus 54%.
One of the biggest misconceptions regarding home buying is the notion of not qualifying and assuming that thousands of dollars are needed. However, there are several lenders that provide zero-down or small money down payments.
“I believe this theory came from the potential buyer asking friends or family for advice, not a professional. Many times, a young buyer will ask a parent or grandparent about financing. When the parent or grandparent purchased their home, interest rates were much higher, sellers rarely assisted with settlement expenses, and you needed about a 20% down payment,” said Isenhour. “Times have changed, so it is wise for potential home buyers to contact a professional in that field for the most up-to-date information.”
What does this mean for the future?
Although, the real estate market is prosperous it is interesting that the majority of Americans are not investing as much money or importance within their 401k accounts. Bankrate.com conducted a similar study and they concluded with the same results. “We’ve begun to see rising yields on savings accounts,” said Mark Hamrick, Bankrate.com’s senior economic analyst. “However, the preferences for cash and real estate indicate that too many people are leaving money on the virtual table by failing to be sufficiently exposed to the stock market, where higher long-term returns are found. This is especially the case for younger investors, who are in the best position to weather the inevitable short-term market volatility.”
In 2016, Gallup determined 50% of non-retirees said 401k would be a major source of income for retirement – compared with only 9% counting on rent or royalties. The latest Wells Fargo/Gallup Investor and Retirement Optimism index survey reported just one-third of U.S. investors, with at least $10,000 in investments, were highly confident that they would have enough money saved to maintain their lifestyle when they reached retirement.
Surveyed reports and professionals believe the real estate market will continue to see an increase in sales and remain as the preferred long-term investment for many years to come.