Are you in the market to make money? If so, you might want to stay away from real estate – that’s at least according to Mark Matson, founder and CEO of Matson Money, INC, a Cincinnati-based investment adviser firm. Mr. Matson was recently on Fox Business’s “Money with Melissa Francis,” where he argued that choosing real estate over equities could possibly be the worst investing mistake one could ever make. His contention goes against popular opinion among investors, who believe that real estate represents the more favorable investment opportunity. However, he does have a few points that support his argument. Let’s take a look at some of the reasons Mark Matson has complaints about real estate:
Real Estate has not performed as well: Since the Bear Market Bottom, the median price for homes has gone up by 11%. Do you know how much stocks have increased in that same time? The Dow Jones Avg. has actually gone up by 150%. Those who invested in equity around this time made a ton of money. And that’s not an acute trend.
Liquidity is dependent on the market: Getting out of stocks is one thing. Even if you do lose money, you can usually get out. On the other hand, getting out of a housing investment requires another player. While a home might be a more fun investment, you do have to put money into the home for upkeep. You are also dependent on demand. If you have a down market, like we saw in the mid-2000s, you might not be able to get the price you want for your home – if you get an offer at all.
Millenials are not buying homes at the same rate as other generations: Many Millenials were badly hit by the recession. Between not being able to get a job because of a down market to incurring huge amounts of debt to finance their degrees, many Millenials are hesitant or unable to purchase that first home. Additionally, many are bypassing home purchases to remain flexible in their careers and other life pursuits. The home may not be the American dream anymore, and if the demand isn’t there, neither are the prices.
Is Mark Matson right? Is choosing real estate over equity the worst investing decision you can make?