If you had asked an educated investor that question ten years ago, they would most likely have looked at you as if you needed therapy. Of course real estate was an essential investment! Stock markets historically go through periods of bubble and bust. Real estate holdings gave stability to many portfolios because the boom and bust cycle tended to be much less dramatic.
The Great Recession shook a lot of people’s confidence in that core belief.
It was with great interest that I read a report at the end of June from CoreLogic that more than 11% of home purchasers in 2018 were investors, such as private-equity firms and speculators – an all-time high. That’s nearly twice the level of investor purchases measured before the beginning of the crash in 2008.
While it’s well known that investors swooped in and bought up thousands of foreclosures at the bottom of the Great Recession, helping to stabilize the market, most analysts expected that pace would slow down as the market recovered and prices rose. Instead, the opposite has happened. “While these purchases dipped slightly when the market started to recover in 2015 and 2016, they have rebounded to surpass the previous peak of six years ago,” says Realtor.com analyst Laura Kusisto.
These investors are very aware of the demographics of the “boom echo” generation now entering prime home buying years, with a lack of inventory of pre-existing homes, and most home builders opting for large, more profitable home models. They see great potential for price appreciation, and high tenant occupancy rates.
Most of these investor purchases are in the lower price ranges, because record-high rents are keeping them very profitable. This may be one important factor explaining why first time home buyers are having such a hard time finding inventory to purchase.
So, the answer to the question, “Is real estate a good investment?” in 2019 seems to remain a resounding yes, judging by the unprecedented behavior of large, professional investors.
If it’s time for you to make a move, either as an investor, first time home buyer, move-up home buyer, or vacation home buyer… let me know! Now more than ever, the services of an experienced professional are crucial to get prompt notification and access to the newest listings.