‘Money with Melissa Francis’ airing on Fox Business hosted Mark Matson to talk about polls that showed investors opting out of equities in favor of real estate. Speaking in terms of numbers, according to the National Association of Realtors, median home prices were up 11.2% since March of 2009. Meanwhile the Dow was up 150% and the S&P up 175% in the same time period. Matson makes it clear that choosing real estate over stocks is a bad idea because the market is a difficult-to-almost-impossible thing to predict. In addition, you could potentially be stuck with a piece of real estate for a long period of time if you can’t sell that property.
Take for instance you are in retirement and you look at the previous 15 to 20 years of the last 30 years. Based on historical market data, real estate has only seen about a 7% increase while the S&P did 11%. Just by going off of those numbers, you could potentially have made more money on stocks than in real estate. While real estate may come with tax benefits, you must take into consideration the maintenance of a property. Routine maintenance is something that adds to costs out of your pocket like roof repair or electrical work. Real estate has many other associated costs like homeowners insurance, utilities, natural disasters – the list can go on.
As we saw in the past with the housing market bubble, it can be difficult to get out while you still can and even then you may take a dive in your investment. Avoid real estate because of all the costs and avoid trying to predict the market because it fluctuates greatly. Stick to long term investments, diversify your portfolio and avoid the real estate game.