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I previously stated how markets are likely to change in 2020. But there is another change in investor mindsets I have not mentioned. In 2018, stocks have been the most popular form of investment. Now real estate has taken the throne as the most popular investment. Is real estate is the best investment of 2020 or is this just an investment fad?
Real Estate Is At An All-Time High
Real estate prices have never been higher. Investing 101 states this would be one of the worst times to invest. But is real estate at a peak, or will prices continue to climb? Like any other type of recession it is difficult to predict when a real estate recession will occur. It is next to impossible to determine if real estate will be the best investment of 2020.
Let’s determine what economic trends will affect real estate. Disposable income and consumer spending have increased according to the bureau of economic analysis. This points towards a bullish housing market. Mortgage rates are lower than ever, but experts believe there will be an even larger shortage in real estate inventory in 2020. Everything appears to show a bullish real estate market.
Not Many People Can Buy Real Estate
Unfortunately, disposable income has not increased to keep up with the rate of price increase for real estate. In fact, the average wage earner cannot afford 71% of houses in the US.
You may own a valuable piece of real estate, but unless someone is buying, that real estate is worthless. That is why I say that everyone needs real estate, but no one needs YOUR REAL ESTATE.
You Can Still Make Money On Real Estate
Real estate has higher rates of returns in the last 20 years than stocks. While sales of real estate may be difficult, there are other ways to make money. You can make cash flow from your real estate from rent. And those who cannot buy real estate will rent.
Real estate is a tricky investment. But there are multiple ways to minimize the risk of real estate including crowdfunding and REITs. I am considering investing into REITs this year to diversify my portfolio, especially since many of my other investments may not have as large of a rate of return this year. If you are already invested in real estate, you may be in for favorable returns this year. If you are not invested in real estate, you may want to diversify to forge your wealth.