By Mike Bodeen · 24 August 2015
STOCKS VERSUS REAL ESTATE?
At last glance this Monday morning, the stock market’s DJIA was off 200 points. That’s really good news considering it started the day being negative by 1000 points — something about China’s slowing economy affecting our market. Hmm.
What usually occurs when this happens is people begin to consider where they should put their investment monies if they were to sell off their stock. Is there a safe harbor out there? What’s interesting to me is that this global stock selloff is confirming what gold and silver investors have known for the past month, that world instability is good for them as the shaky markets drive up the price of precious metals. These commodities have risen 7% in the past 30 days. There are some however who are not as bullish on these metals as they used to be.
An industry expert told me today that Phoenix real estate should perform relatively well with the sort of deflation that many fear we will be driven into based on China’s current economic trend. This, he said, was because of our chronic short supply in relation to our growing population, which if you have been following us for a while, you probably have heard us talk about more than a few times!
I wonder if many will see Phoenix real estate investments as that safe harbor. Why? We have rapidly rising rent prices, low mortgage rates, and even though it’s a seller’s market for most investor price ranges, prices are still competitive compared to other metropolitan areas in the country. It’s a market that many see stability and future growth in.
Today’s chart well illustrates much of what we’ve been preaching about in Mike’s Monday Market Snapshot including:
1. Renters needing to become real estate owners as rental and home prices are rising and that’s a negative double whammy for their paralysis.
2. A rental investment whether single family or multifamily is a good long term strategy. Rental prices, per the chart are at their highest level in ten years and have risen consistently since 2010.
3. Rent prices seem to be the one item rising faster than anything else in our economy. Source: Michael Orr of ASU/Cromford Report.
4. Interest rates CONTINUE TO REMAIN LOW which gives the buyer/borrowers an incredible opportunity.
Though my near 40 year career has been in real estate, and I’ve always been an advocate for Real Estate investment, my intention is not to bash stocks. In fact, my father’s success in investing utilized a balance of both real estate AND stocks. He was a common butcher with uncommon trust in his advisors who helped him select singular stocks based on their individual merit. He kept them for the long haul and never seemed to worry about the day to day gyrations of his stock because he was secure with the inherent strength of these selected companies. In the end he was financially well cared for and more importantly he lived life well, relatively free of worry, excepting of course for some of his wayward children – present company included. The point being, I’m not going to sit here and tell you that Real Estate is always better than stocks.
While real estate and the stock market are entirely different animals, they do both share that quality where the little guy is most successful when he plays the long term buy and hold strategy, like my father did.
In the end…my father was financially well cared for and more importantly he lived life well, relatively free of worry…
These are fascinating times we live in – in every corner of the globe.
Let us know if we can help you. If you or someone you know is considering a rental investment, or a first time home purchase, have them call me. We can help.
Market data referenced in this article comes from The Cromford Report.