Here’s Why Americans Love Real Estate When It Comes to Investing for the Long Term
Investing may sound intimidating to people who have never done it before. For years, Gallup, the research and poll organization, has asked investors about the best long-term asset; since 2013, the answer has always been real estate. In 2024, around 36% of the vote favored buying property, which was followed by stocks and mutual funds coming in at 22%, gold at 18%, and savings accounts and certificated deposits at 13%. While 4% chose bonds, and 3% opted for cryptocurrency.
Real estate has always been pretty popular among investors who appreciate the great deal of flexibility that it offers. This means that not only can you use the property as your primary residence and still get a better deal when selling it later but you could also be treating it as a commercial property and make a new stream of monthly income. Apart from this, real estate is also great when it comes to tax benefits. You see mortgages are often tax-deductible which can be beneficial for a lot of people. On top of that, real estate is one of the few tangible assets, that can be seen and touched, unlike assets like bonds and stocks. This makes real estate even more appealing to investors.
However, it's important to understand that the question asked in the poll can be a bit vague and can be perceived by people in many ways, per Gallup. For example, one can also invest in real estate by ingesting in real estate investment trusts, which trade like stocks, or ETFs that hold them. However, for most Americans investing in real estate likely means buying a primary residence, and as one pays down the mortgage they build equity in a piece of real estate that also appreciates.
However, if we were to search for examples from the past, it looks like stocks have proved to be the better option time and again. According to the S&P CoreLogic Case-Shiller U.S. National Home Price Index which began in 1990, it was seen that residential real estate values have risen by 308% while home prices have quadrupled over the last three decades. However, when it comes to the stock market, the overall market rose by 1,325%.
"You can’t negate the compounding power of stocks over the long term for any investor, especially young investors," says Andrew Briggs, a wealth manager and director of portfolio management at Plaza Advisory Group, via CNBC Make It.
The stock market also gets the edge when it comes to being beginner-friendly. A huge advantage of investing in the stock market is that it's pretty easy to get started where as investing in real estate needs a considerable amount of money.
However, for most people, long-term investment is more about stability and security than about getting the highest returns. Real estate can not only provide that but can also generate cash flow. On top of that, it can give you tax breaks and make you eligible for deductions. Moreover, investing in real estate can also be great if you are looking to diversify your portfolio. So, lastly, it depends on a household's needs, and one should take time to evaluate and weigh the sides to make a sound decision.