Is real estate investing a good idea right now?
For investors, as interest rates rise, financing costs for real estate investments increase. That could potentially discourage investors. But that often leads to higher rents, which could make 2024 a favorable time for investing in real estate. There's no such thing as a perfect time to invest.
As a result of the Federal Reserve's quick interest rate rises, housing prices are shifting down from their 2020-2021 peaks. Investors in rental properties continue to enjoy historically low and reasonable interest rates. Real estate is a long-term investment with a favorable long-term prognosis for current investors.
Most experts expect home prices to continue to increase in 2024, which will continue to make homeownership inaccessible to many. However, some forecast the prices will drop. Here's a handful of predictions. For context, home prices rose by 7.1% in 2023, according to Fannie Mae.
Best Time to Sell Your House for a Higher Price
April, June, and July are the best months to sell your house in California. The median sale price of houses in June 2023, was $796,400, which is expected to grow more in 2024. However, cities like Arcadia and San Mateo follow an upward trend throughout the year.
Generally, stocks have proven to be more profitable than real estate. For example, U.S. housing prices have grown 5.4% year-over-year from March 1992 to June 2023, according to data analytics firm CEIC. During the same period, the S&P 500 has increased 8% in price.
Real estate can provide passive income that carries you through the financial lows. Owning a physical property provides you with a tangible asset you can rent, sell or leverage—especially when housing inventory and vacancy levels are extremely low.
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Bonds.
- Money market funds.
- Mutual funds.
- Index Funds.
- Exchange-traded funds.
- Stocks.
The bottom line. Today's elevated mortgage rate environment isn't preferable for homebuyers, but it doesn't mean that you should refrain from acting, either. If you discover your dream home, can afford the interest rate, find an affordable house, or have an alternative to rent, it can be worth it for you now.
The March Housing Forecast from Fannie Mae puts the average 30-year fixed rate at 6.7% during the first quarter of 2024, falling to 6.4% by year-end. This reflects an upward revision in Fannie's analysis: Just last month, the mortgage giant expected rates would dip below 6% at the end of this year.
The Fed raised the rate 11 times between March 2022 and July 2023 to combat ongoing inflation. After its December 2023 meeting, the Federal Open Market Committee (FOMC) predicted making three quarter-point cuts by the end of 2024 to lower the federal funds rate to 4.6%.
Is it smart to sell house to pay off debt?
Selling your home is a major way to reduce debt. If your mortgage payment is bigger than you can afford, it may be smart to sell your house and downsize. Or if you're struggling with bills, getting money for the value of your home can help you pay down your debt.
Should I sell my house now, before there's a recession? Recessions mean belt tightening and potential layoffs. If your area is hard-hit by job losses, the number of qualified buyers will be severely limited — if you're concerned, it might be best to sell before that (potentially) happens.
Mortgage giant Fannie Mae likewise raised its outlook, now expecting 30-year mortgage rates to be at 6.4 percent by the end of 2024, compared to an earlier forecast of 5.8 percent.
An alternative to traditional real estate: REITs
The most reliable REITs have a strong track record for paying large and growing dividends. Many online brokers offer publicly traded REITs and REIT mutual funds and ETFs — meaning you can buy them in the same place where you can buy stocks.
Historically, the stock market experiences higher growth than the real estate market, making it a better way to grow your money. Stocks are more volatile than housing, making real estate a safer investment. Stock earnings are taxed as capital gains when realized. Stocks have no tangible value, whereas real estate does.
- High-yield savings accounts. Overview: A high-yield online savings account pays you interest on your cash balance. ...
- Long-term certificates of deposit. ...
- Long-term corporate bond funds. ...
- Dividend stock funds. ...
- Value stock funds. ...
- Small-cap stock funds. ...
- REIT index funds.
Cash: Offers liquidity, allowing you to cover expenses or seize investment opportunities. Property: Can provide rental income and potential long-term appreciation, but selling might be difficult during an economic downturn.
Because a decline in disposable income affects prices, the prices of essentials, such as food and utilities, often stay the same. In contrast, things considered to be wants instead of needs, such as travel and entertainment, may be more likely to get cheaper.
Essential property types such as multifamily housing or healthcare facilities that will continue to be in demand during a recession remain a good investment. Geographic factors can be a significant characteristic to understand in the recession-proof market.
- High-yield savings accounts.
- Money market funds.
- Short-term certificates of deposit.
- Series I savings bonds.
- Treasury bills, notes, bonds and TIPS.
- Corporate bonds.
- Dividend-paying stocks.
- Preferred stocks.
What is the most safest investment right now?
- U.S. Treasury Bills, Notes and Bonds. Risk level: Very low. ...
- Series I Savings Bonds. Risk level: Very low. ...
- Treasury Inflation-Protected Securities (TIPS) Risk level: Very low. ...
- Fixed Annuities. ...
- High-Yield Savings Accounts. ...
- Certificates of Deposit (CDs) ...
- Money Market Mutual Funds. ...
- Investment-Grade Corporate Bonds.
- Pay down high-interest debt. ...
- Build an emergency fund. ...
- Stash your money in a high-yield savings account. ...
- Put your cash in a certificate of deposit (CD) ...
- Contribute to an individual retirement account (IRA) ...
- Get your 401(k) employer match. ...
- Invest with a robo-advisor.
It's possible that rates will one day go back down to 3%, though if current trends hold that's not likely to happen anytime soon.
Is it ever smart to put down less than 20 percent? For most homebuyers, a down payment of less than 20 percent will generally cost more money in the long run. But if saving up that kind of money will keep you from ever owning a home, it's worth considering.
If getting the lowest price possible is your main priority, consider searching for a home in November or December. There won't be as many houses to choose from compared to the spring and summer months, but you'll face less competition and a higher likelihood of purchasing a home below the asking price.
References
- https://realtyna.com/blog/real-estate-affect-economy/
- https://finance.yahoo.com/news/4-most-popular-banks-millionaires-150054420.html
- https://www.visualcapitalist.com/visualizing-the-investments-of-the-ultra-wealthy/
- https://www.bankrate.com/real-estate/20-percent-down-payment-for-house/
- https://www.investopedia.com/articles/investing/122415/why-real-estate-risky-investment.asp
- https://www.passiveinvesting.com/profit-principles-five-keys-to-success-in-real-estate-investing/
- https://www.investopedia.com/articles/mortages-real-estate/11/the-truth-about-the-real-estate-market.asp
- https://www.cbsnews.com/news/wealth-1-percent-5-8-million-knight-frank-report/
- https://finance.yahoo.com/news/7-things-must-start-making-173436243.html
- https://www.fool.com/the-ascent/personal-finance/articles/what-are-the-odds-of-becoming-a-millionaire/
- http://www.reinvestorprofessor.com/real-estate-investing-basics/how-does-real-estate-investment-work/
- https://www.investopedia.com/articles/mortgages-real-estate/11/make-money-in-real-estate.asp
- https://www.progressive.com/answers/best-time-to-buy-a-house/
- https://finance.yahoo.com/news/know-im-rich-140000452.html
- https://www.gobankingrates.com/money/financial-planning/erin-talks-money-how-90-of-millionaires-reached-7-figures/
- https://www.linkedin.com/pulse/real-estate-economics-understanding-7-key-characteristics-determine
- https://www.baymgmtgroup.com/blog/roi-for-rental-property/
- https://www.birgo.com/blog/why-is-real-estate-investing-more-stable-than-the-stock-market
- https://finance.yahoo.com/news/real-estate-investors-know-2-140022629.html
- https://time.com/personal-finance/article/best-investments-for-beginners/
- https://www.fortunebuilders.com/best-type-property-real-estate-investing/
- https://talkmarkets.com/content/how-much-money-do-i-need-to-invest-to-make-3000-a-month?post=431352
- https://www.investopedia.com/investing/reasons-invest-real-estate-vs-stock-market/
- https://www.linkedin.com/pulse/what-does-recession-mean-housing-market-bestrealestatemarket-jsskc
- https://www.hiration.com/interview-prep/real-estate-agent-interview-questions/
- https://www.thestreet.com/investing/real-estate-vs-stock-investing-15106133
- https://smartasset.com/investing/50-rule-real-estate
- https://maxwave3d.com/real-estate-marketing-4ps/
- https://careers.publichealth.iu.edu/blog/2023/05/11/what-are-your-strengths-15-greatest-strengths-with-sample-answers/
- https://www.forbes.com/advisor/investing/best-low-risk-investments/
- https://www.investopedia.com/ask/answers/052015/which-has-performed-better-historically-stock-market-or-real-estate.asp
- https://themilitarywallet.com/best-careers-to-get-rich/
- https://www.quora.com/Is-it-common-for-millionaires-or-billionaires-to-eventually-go-broke-Is-there-a-limit-to-how-much-money-can-be-spent-before-returning-to-poverty
- https://www.experian.com/blogs/ask-experian/housing-market-predictions/
- https://www.investopedia.com/ask/answers/032415/which-investments-have-highest-historical-returns.asp
- https://www.bankrate.com/investing/best-investments/
- https://www.aesinternational.com/blog/the-pros-and-cons-of-owning-a-rental-property-vs-stock-market-investing
- https://www.investopedia.com/articles/investing/093015/6-investing-mistakes-ultra-wealthy-dont-make.asp
- https://www.investopedia.com/articles/personal-finance/040215/real-estate-broker-career-you.asp
- https://www.driggstitle.com/real-estate-characteristics/
- https://money.usnews.com/investing/articles/how-to-become-a-millionaire-by-investing
- https://www.investopedia.com/articles/investing/072314/investing-real-estate-versus-reits.asp
- https://www.excaliburhomes.com/5-hard-truths-to-know-about-real-estate-investing/
- https://money.usnews.com/investing/articles/real-estate-vs-stocks-which-has-higher-returns
- https://www.saxllp.com/advantages-and-disadvantages-of-investing-in-real-estate/
- https://money.usnews.com/loans/mortgages/mortgage-rate-forecast
- https://www.experian.com/blogs/ask-experian/real-estate-vs-stocks-which-is-better/
- https://www.bankrate.com/investing/low-risk-investments/
- https://www.chegg.com/homework-help/questions-and-answers/one-following-disadvantage-real-estate-investments-correct-answer-property-management-requ-q112924131
- https://baroncabot.com/blog/invest-in-property-or-shares
- https://www.noradarealestate.com/blog/how-to-make-money-in-real-estate/
- https://www.nar.realtor/magazine/real-estate-news/survey-big-challenges-on-horizon-for-real-estate-firms
- https://www.financialsamurai.com/why-its-harder-to-get-rich-off-stocks-than-real-estate/
- https://www.debexpert.com/blog/the-risks-of-investing-in-real-estate-stocks
- https://www.bankrate.com/mortgages/mortgage-interest-rates-forecast/
- https://www.noradarealestate.com/blog/real-estate-investing-for-beginners/
- https://www.cnbc.com/select/when-will-interest-rates-drop/
- https://www.linkedin.com/pulse/recession-proof-real-estate-investing
- https://moneywise.com/investing/real-estate/is-it-good-investment
- https://www.tiktok.com/@kriskrohn/video/7249446262897085742
- https://www.linkedin.com/pulse/heres-why-every-real-estate-agent-should-work-investors-abhi-golhar
- https://www.continuingedexpress.com/career-licensing-pro-con
- https://www.investopedia.com/articles/investing/110614/most-important-factors-investing-real-estate.asp
- https://www.nerdwallet.com/article/investing/real-estate-vs-stocks-which-is-the-better-investment
- https://www.hiration.com/interview-prep/realtor-interview-questions/
- https://www.homebuyersofpittsburgh.com/selling-home-to-pay-debt
- https://www.rocketmortgage.com/learn/1-rule-real-estate
- https://www.houzeo.com/blog/best-time-to-sell-a-house-in-california/
- https://butterflymx.com/blog/roi-real-estate/
- https://www.nerdwallet.com/article/investing/the-best-investments-right-now
- https://www.linkedin.com/pulse/real-estate-risk-free-investment-sakshi-gupta
- https://www.debtfreedr.com/10-things-millionaires-do-not-spend-money-on/
- https://www.usbank.com/investing/financial-perspectives/investing-insights/percentage-of-cash-in-my-portfolio.html
- https://www.forbes.com/sites/forbesfinancecouncil/2024/01/18/why-recessions-can-be-a-good-time-to-invest-in-real-estate/
- https://www.libertylandtransfer.com/post/the-three-most-important-words-in-real-estate-part-i
- https://www.businessinsider.com/personal-finance/will-mortgage-rates-go-down-in-2024
- https://quizlet.com/352592200/chapter-5-real-estate-investments-flash-cards/
- https://www.linkedin.com/pulse/what-real-estate-creates-90-millionaires-ben-lovro
- https://www.rocketmortgage.com/learn/what-is-70-rule-in-house-flipping
- https://www.rocketmortgage.com/learn/benefits-of-real-estate-investing
- https://edvoy.com/articles/which-degrees-make-the-most-millionaires/
- https://www.bankrate.com/investing/diversification-is-important-in-investing/
- https://www.cbsnews.com/news/times-you-should-buy-a-home-with-interest-rates-high/
- https://time.com/personal-finance/article/ways-to-invest-1k/
- https://www.bankrate.com/real-estate/should-i-sell-my-house-now-or-wait/
- https://www.linkedin.com/pulse/what-occupation-produces-lot-millionaires-mukesh-kumar
- https://www.fool.com/the-ascent/personal-finance/articles/dave-ramsey-says-these-are-the-top-5-careers-of-millionaires/
- https://www.fastcompany.com/90800373/real-estate-is-the-safest-investment-you-can-make-today-millionaires-say-heres-why
- https://www.forbes.com/advisor/investing/roi-on-real-estate-investment/
- https://www.primerica.com/public/rule-of-72.html
- https://www.ent.com/education-center/life-events-major-purchases/10-benefits-of-owning-a-home/
- https://quizlet.com/284305084/chapter-19-investing-in-real-estate-flash-cards/
- https://www.rpmeclipse.com/why-real-estate-is-less-volatile-than-the-stock-market-662
- https://www.nasdaq.com/articles/do-prices-go-down-in-a-recession-heres-what-usually-gets-cheaper
- https://www.quora.com/Do-most-billionaires-invest-in-stocks-or-real-estate
- https://www.agentlegend.com/blog/use-the-80-20-rule-to-make-more-money-in-real-estate-this-year
- https://www.investopedia.com/ask/answers/100214/what-are-differences-between-investing-real-estate-and-stocks.asp
- https://www.forbes.com/sites/forbesbusinesscouncil/2023/10/30/exploring-the-pros-and-cons-of-real-estate-investment/
- https://www.realestateinvestorgoddesses.com/blog/7-reasons-you-should-be-investing-in-real-estate
- https://smartasset.com/investing/pros-and-cons-of-stocks
- https://www.investopedia.com/articles/investing/071414/when-and-why-do-gold-prices-plummet.asp
- https://www.parvisinvest.com/insights/direct-vs-indirect-real-estate-investments-explained
- https://financebuzz.com/who-shouldnt-invest-real-estate
- https://www.investopedia.com/articles/mortgages-real-estate/11/key-reasons-invest-real-estate.asp
- https://www.businessnewsdaily.com/2871-how-most-millionaires-got-rich.html
- https://joshdotoligroup.com/blog/15-common-real-estate-questions/