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4 Reasons Americans Still Favor Real Estate Over Stocks

Fri, May 1, 2020

investinginrealestate-covid-realestateorstocksWhile our primary concern throughout the COVID-19 pandemic has been the health and safety of those around us, all of us share economic concerns as well. When we look to the future, uncertainty abounds.

However, surveys show that the major of Americans, both low and high-income, still feel favorably towards real estate investment. Support for investing in real estate has only grown — its popularity exploded by 2013 and in 2016, it was the top investment of choice.

By contrast, Gallup polls show that Americans across the board have soured on stock investments and mutual fund investing. Polls report that only 21 percent of Americans think stocks and mutual funds are the best long-term investment. That’s down six points from last year and the lowest recorded rating since 2012.

It should be noted that the Gallup survey was performed when the stock market was rallying from its all-time low in March 2020.

By contrast, 35 percent of Americans consider real estate to be the best long-term investment. This has been the case, with some one-third of Americans choosing real estate as their best long-term investment, since 2016.

By why is this the case?

After all, the real estate market faces its own challenges during this time. Why is real estate still considered the best investment you can make?

4 Reasons Real Estate Investment Comes Out on Top

Housing Market Decline and Recession are not Inherently Linked

For many of us, the first economic crisis we think of is the Great Recession of 2008. Unfortunately, it is not the ideal point of comparison. While the Great Recession was intrinsically linked to the housing market (and thus, we saw massive shockwaves through markets nationwide), this is not necessarily the case for other recessions. 

In fact, historically speaking, the housing market is large unaffected or sees growth in times of recession. Real estate is synonymous with resilience. Even in the worst of times, we see how readily and how well real estate recovers. We have no reason to assume that this crisis will bring about different results.

The Market is Poised for Competition

It may not seem like it, but the real estate market, on the whole, is still poised for competition. When the market returns to business-as-usual, demand will no doubt be high and competition fierce. One of the reasons the real estate industry had not yet experienced a bust — despite being long overdue according to real estate cycle patterns — is that inventory was tight. 

Be sure to check out: Finding Real Estate Deals When Competition Rises

We’ve seen a decade-long strong for new construction to catch up with housing demand. This is what accelerated prices in many markets. Right now, that construction shortage is only being exacerbated on top of sellers taking their homes off of the market. 

Even now, we’re looking at the potential for competition simply based on supply and demand!

We Know How Real Estate Moves

As we have mentioned frequently in recent days, the real estate market moves in a reliable and predictable cycle. We may not know how long each stage of the cycle will last, but we know that there is a cycle. There is an end to periods of recession, and recovery will come in due time. Because of this, real estate investors can trust in a long-term strategy. They can be patient and wait for the right moment. 

This level of predictability is not found in stocks. While the stock market moves in its own cycle as well, individual stocks can fluctuate based on any number of factors. The real estate market is far less subject to these variables, particularly when we look at a market-by-market case. To have fewer factors influencing the health of the market means that risk is easier to manage.

Everyone Needs It

In Maslow’s Hierarchy of Needs, the base of the pyramid — the essential needs — are made up of the physiological. These include food, air, water, sleep, reproduction, and yes...shelter! Shelter is essential for man. According to Maslow, human beings are likely to try to meet these physiological needs before others, including safety needs and loving and belonging.

Why bring up Maslow when talking about real estate? We mention it because we need it. While it is not necessary to own property to have shelter, we need that shelter nonetheless. For real estate investors, it points to the essential nature of the real estate industry, whether buying, renting, or constructing.

There will never not be a demand for real estate because of our physiological needs. Because of that, there is always an assurance for opportunity. While this opportunity may fluctuate, we know that the need — the demand — will always remain

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Chris Clothier
Written by Chris Clothier

Entrepreneur, writer, speaker, ultra-endurance athlete, husband & father of five beautiful children. Chris puts these natural talents on display every day. As a partner at Memphis Invest, Chris addresses small and large audiences of real estate investors and business professionals nationwide several times each year. Chris is also an active writer, weekly publishing real estate, leadership, and endurance training articles.

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