The stock market is a funny game. Not the kind of game that the rookie Game Stop investors are used to playing, but a real-life, action-packed, form of entertainment that toys with millions of Americans’ emotions and finances every day. You know what isn’t a game, and can also provide oh-so-sweet returns? Investing in real estate.
The stock market is at an all-time high, finishing 2020 at record levels. But these gains are a temporary disguise, masking the true future of a volatile market.
In 2020, home prices soared by nearly 10% to levels not seen since 2014, all while inventory dropped significantly. The high demand created a competitive market, but also a successful investment environment for real estate enthusiasts.
More for Real Estate Enthusiasts
Don’t Wait To Invest In Real Estate
Everyone should follow the idea of “Don’t wait to buy real estate, buy real estate and wait.” While, like the stock market, the waiting game for a real estate payoff can prove to be taxing, the reward is a very sweet victory. You may even get a few more hours of sleep along the way.
Prior to 2020, properties typically appreciated at a little under 4% per year. However, even individuals that purchased homes in 2020 have seen an increase in home value after just one year of homeownership. According to CoreLogic, homeowners saw an 8% increase in home prices in 2020.
2021 is going to be another pivotal year for real estate, and it is estimated that the real estate market will see its highest level of activity ever, and home values are expected to continue to rise.
As numbers have surged during the pandemic, they are going to continue to grow for a different reason. The stock market.
As the stock market adjusts to its new normal, the real estate market is growing stronger and stronger. And more importantly, it’s growing with stability.
An investment in real estate is an investment in a tangible item. This tangible thing isn’t managed by an investment firm on Wall Street, or through an app – how stressful is that? Real estate is a physical investment that you can touch, feel and live in.
Not only is the investment tangible, but as home appreciation values continue to rise, real estate continues to prove a valuable investment as well.
2021 Will See Continued Growth
These opportunities available in real estate are going to cause a tech disruption on the investment side. 2021 will see a plethora of offshoot companies and crowdfunding for real estate that hasn’t been seen before.
Real estate investments have generally been focused on the brokerage side, but it makes sense for individuals to pull their money together, buy a property, and have that value appreciate.
Call your friends, go buy some properties. Then let the market do the rest of the work.
When investing in real estate, you don’t have to watch the value appreciate through a chart. You can drive-by your investment, disguised as a property, and check it out for yourself.
Another new dynamic to investing in real estate rather than the stock market is in the capitalization rate. Investors, in general, want to see a return on their investment at a 6 cap or higher, but because the security of real estate is so strong right now, I expect investors will buy at a lower cap rate.
A real estate investment provides security. 2021 is the time to jump on that opportunity.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
To contact the editor responsible for this story:
Sarah Wheeler at swheeler@housingwire.com
