As the stock market continues to seesaw and crypto takes a free-fall, many investors are looking to diversify their portfolios elsewhere- moving away from intangible assets to more tangible ones. In times of uncertainty, investors are faced with two options: sink their money into the stock market or the real estate market. Choosing to invest in one of the most basic human needs- housing- is becoming more appealing as many are growing increasingly weary of the alternative.
If you are a buyer trying to weather today's economic climate and looking for a primary purchase or an investment, the many benefits of owning real estate versus stocks have never been more evident. Firstly, real estate owners benefit from substantial tax advantages and have the option to leverage existing wealth to make an initial purchase and then re-invest to expand their portfolio. Further, depending on the property you choose, owners benefit from long term appreciation and/or immediate positive cash flow (if choosing to invest). And in times of recession, most experts argue real estate is the best way to go. Put simply, housing is more critical for human existence than intangibles such as social media, cryptocurrency and the metaverse- although some Silicon Valley techies may actually argue otherwise.
In the Bay Area, we are acutely aware of the importance of housing- a dangerous shortage coupled with high demand has secured this as one of the most expensive places in the country to live. But in today's market, buyers who were once priced out are weighing their options. With a newfound negotiation power, most buyers are able to obtain properties at a discounted price- prices that would have been unthinkable just one year ago. Furthermore, the rental market often remains strong during economic downturns, allowing for real estate investors to find deals and ultimately demand higher rents.
Despite the softening market, Bay Area real estate remains a strong long-term investment for those who have low risk tolerance and those who are patient. Interestingly in recent years, investing in real estate has become even more appealing to younger cohorts. The National Association of Realtors (NAR) reports approximately 43% of people under the age of 40 are skeptical of the stock market, and instead of purchasing shares, they are prioritizing real estate investing as a strategy to build long-term wealth. But investors aren’t just looking in their local neighborhoods for deals. “Remote investing” has become more common as investors choose to look outside their home markets for opportunities where the barrier to entry is lower.
Ask any savvy investor and they will tell you to limit your exposure through diversification. Although the housing market has slowed, many expect a rebound at the end of next year and into 2024. Whether you’re a betting person or not, history proves that Bay Area real estate is always a good gamble. After 2+ years of living in a seller's market, real estate experts believe 2023 will bring more balance. What does that means for buyers? A chance to re-enter the market and benefit from a reliable long term investment.
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