Real estate is seen as the most stable and secures investment option. While the stock market and other investments are prone to major fluctuations, real estate values tend to remain relatively steady over time. There are several key reasons why real estate continues to be a haven for buyers in times of economic uncertainty.
The stocks and other securities, real estate does not frequently experience huge swings in value. The real estate market tends to move at a slower, steadier pace compared to other investment vehicles. Of course, real estate trends and prices change over time, with spikes and dips like the stock market. This makes real estate attractive to risk-averse investors and predictable growth over “hitting it big” with a hot stock or high-risk investment.
Real estate is a tangible asset, meaning you see, live in, and derive income from the property. You do not own just a piece of paper or electronic share. This tangible element makes Missouri Real Estate MLS more reassuring as an investment for many people relative to owning intangible assets subject to market manipulation. Real estate is an investment for people who feel good about owning.
During times of inflation, real estate values tend to rise alongside the general cost of living. Therefore, real estate provides a valuable inflation hedge. When inflation rises, rental incomes will most likely rise as well, providing a valuable buffer for investors. Even if other investments lag during inflationary times, real estate generally retains its value and may even appreciate at a faster rate.
Real estate also allows investors to utilize leverage to maximize returns. While leverage increases risks, it boosts gains from a good real estate investment when used prudently. Investors only need to put down 20-25% on a property, gaining the remaining mortgage through a bank loan. If the property appreciates substantially, the investor gains multiples over their original down payment. Such leverage is rarely available with other common investment asset classes.
Real estate investments like rental properties generate passive income without requiring ongoing labor after initial setup. Investors earn monthly cash flow from rent payments, acting as “passive” income requiring little maintenance or effort. Positive cash flow real estate investments are a hedge against market fluctuations since they generate steady rental income even when property values decline.
Hedge against stock market volatility
During times of stock market uncertainty and volatility, investors often flock to real estate for shelter. Money moves out of Wall Street and into “Main Street” when economic conditions sour or appear unstable. While stocks make investors nervous, real estate provides the comfort of tangible land and property. Real estate and stocks have a very low correlation, making real estate an ideal way to diversify an investment portfolio.
Protection against inflation
Real estate values and rents tend to increase during times of high inflation. Therefore, real estate serves as an inflation hedge investment. When your money is losing purchasing power sitting in the bank, real estate helps protect against inflation erosion. Investors gain the peace of mind that rents and property values are adjusting upwards with inflation.