Real Estate Investments Slowing

In 2016, real estate investments were the top choice for investors big and small, however, in the past two years, their habits have changed. A recent survey conducted by Bankrate reveals that real estate investments have dropped two spots, to number three, this year.

Americans spanning all ages included in the survey by Bankrate in regard to their investment choices for money that they don’t need for the next ten years.  The survey showed that 32% of Americans preferred stocks as their number one investment form.  Coming in second at 24%, those survey indicated that cash investments were best. Coming in third were real estate investments, which survey respondents indicated as the best choice at 22%.  According to Bankrate, this is the first time in four years that real estate investing has not been the favorite among American investors.

According to Chief Financial Analyst Greg McBride, “for investment horizons of longer than 10 years, the stock market is an entirely appropriate investment.  Cash is not, and especially if you’re seeking out the most competitive returns.”  Nowadays, the majority of Americans favor investing in the stock market.  While it is true there is no guaranteed return, the average annual return has continued to draw investors and, in recent years, the stock market has continued to boom which provided investors across the board with a strong return.

While stocks are trending upward, real estate investments are trending down.  One of the main reasons that real estate investments have stalled is the existing home sales and home construction numbers.  In June alone, home sales dropped by 2.2% and mortgage applications fell.  As home sale and mortgage application numbers continue to drop with rising interest rates, it is likely real estate investing will continue to hold in the third position.

The change in attitude and responses can be attributed to more than just the financial situation. The culture and mindset of the average investor is changing as well.  Millennials seem to be losing hope in or are no longer in search of the American Dream.  In a recent study by the Bank of the West, only 54% of Americans think the American Dream is attainable.  Even more so, only 25% have given up on the idea of homeownership in general.  These numbers do not provide a promising outlook for real estate investing.

The recent survey by Bankrate also indicated other preferred investments for Americans beyond the top three.  While real estate investments slumped in the past few years, it looks certain that they will maintain the number three spot or better in the years to come.  In the survey, 9% of respondents indicated they preferred precious metals, such as gold and silver, as the best investment. 8% indicated that they prefer bonds and 2% indicated they prefer investing in bitcoin and other cryptocurrencies.

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