A new survey, conducted by Bankrate, reveals a changing trend in American investment preferences that may surprise some readers affected by the housing crash of 2007.
In 2015, the #1 investment choice for Americans is real estate. 27% of those surveyed answered that, if they had extra cash to invest, real estate would be their first choice. Real estate beat out cash investing, consisting of savings and CDs, which was the top choice in 2014.
What’s Responsible for Changing Investment Choices?
As more and more Americans lean toward real estate as their #1 investment choice, experts are pondering what has led to this changing trend.
Most likely, individual investors have taken note of the improving performance of real estate in recent years, and realized that the 2007 housing woes are now in the past. As the housing crash recedes further into people’s memory, real estate will continue to become a more attractive option for individuals looking for a smart and stable investment.
Should Americans Love Real Estate Investing?
To determine whether or not Americans who prefer real estate as an investment opportunity are on to something, it’s necessary to take a look at the other options cited in the Bankrate survey.
Last year, cash investing was the #1 preference of Americans with extra money, which came in second place this year with 23% of Americans preferring savings or CDs. Cash investing is certainly a safe place to put your money. But, cash investments, while safe, have very low rates of return. Often, cash savings return rates that barely keep up with inflation, or show a very small return once inflation and all other factors are considered. Real estate, with its historically higher long-term rate of return, is certainly a more logical place to put money compared to cash.
Next, stocks are on the list of preferred investments, with 17% of respondents noting they would invest extra money in the stock market. Historically, the stock market has been one of the highest performing investments. But due to recent market volatility, investors see the stock market as becoming more risky.
Pros and Cons of Real Estate Investing
Proponents of real estate investing are happy to see more Americans favoring real estate over other investments, and contend that there are some major “pros” associated with real estate.
For starters, real estate is traditionally a very stable investment over the long term, which almost guarantees returns on a long-term basis. This stability is part of real estate’s charm, in addition to the fact that average investors believe real estate is a more “tangible” investment than stocks or other abstract investment categories.
Of course, the stability of real estate investments comes at a cost. In the short term, real estate investing isn’t likely to see huge returns. That’s partially due to small variations in markets which make housing prices rise and fall in the short term, and partially due to the fact that real estate investments can take time to liquidate.
Will Real Estate Investing Keep Growing?
Despite some of the “cons” noted above, Americans’ preference for real estate investing is likely to continue growing in coming months. Housing markets are on the rise, with home sales rising to the highest level in seven years this past spring.
As housing markets continue to rise, and the memories and fears of the 2007 housing collapse sink into the past, more and more Americans are likely to list real estate as one of their top investing priorities. And according to experts, that’s not a bad thing. Real estate investing is very profitable, and has some distinctive advantages over most other investments.
Review the Bankrate survey, “Survey reveals Americans’ top investment choice: Real estate”.
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