IS IT WISE TO INVEST IN REAL ESTATE DURING INFLATION??

By Corrie Forcet, Realtor® | The Forcet Group | KW Suburban Tampa

It's not a secret; inflation is rising and recession talk is buzzing. The housing market is shifting and stocks are experiencing struggles. So is there a safe place to put your money as the storm blows over? What are the facts about investing in real estate during times like these?

What Does History Confirm?:

Real Estate Values Increase Despite Inflation and Recessions

When an economic downturn hits, investments generally suffer losses. GDP decline is inevitable and stock market investments tend to take a hit over months, sometimes years. What does history tell us about real estate investing during a downturn? Despite numerous recessions over the last 60 years, real estate values have continued to increase. Sometimes, they’ve increased during the recession itself, according to economic data reports based on the U.S census. FRED Economic data report. But why is this the case?

What Is The Reality?:

Small Scale Real Estate Is Not As Volatile As The Stock Market

Searching for a reliable and solid investment during a stock market decline can be like searching for a needle in a haystack. The volatility of business commerce during a downturn means that investing in the stock market is risky at best. However, small-scale real estate is not a part of the daily ebb and flow of stock trading; meaning, less volatility. The temptation to buy and sell quickly as the market rises and falls is immense - but this tendency often leaves investors with little to show for their research and efforts. However, with real estate, that knee-jerk impulse simply isn't possible. This is to an investor's advantage, real estate demands a slower, controlled, and well-thought-out investment strategy.

What Is The Bottom Line?:

Everyone Needs A Place To Live

The reality is, during economic instability, many homeowners become renters and already existing renters become exceptionally pessimistic about entering the housing market for the first time. Typically, in the past, interest rates tend to decline during a recession as loan demand declines. Today, however, the situation is quite different. Interest rates are the highest buyers have seen in decades; this inevitably reinforces "renting" to those who do not yet own. This creates an even stronger projection that rental demand will remain high during the recession. Housing is a fundamental need. While many will opt out of buying a new car, new phone, or even a new house during economic instability, most will not opt out of having a place to sleep. Therefore, if people cannot buy, they must rent.

And as we learned during COVID - a business can be directly impacted by economic shifts in an instant. Success in the commercial real estate realm depends on how successful the business is. A home, however, is required no matter how the economy is flourishing. Again, for the people in the back - we all need a place to live. Bottom line.

Real Estate will be a basic requirement for all time, therefore it will always be one of the most conservative ways to invest your money. Nevertheless, no matter the climate, every investment is a risk and every investment requires cash flow, good timing, and an excellent strategy. If you think you have the proper tools to consider investing in real estate, give me a call and we can dissect how to meet your goals with the assets you have in place.