According to a recent Gallup poll, real estate beats out stocks, bonds, savings accounts and even the Great Recession’s investment darling, gold, as the favored form of long-term investment. A full 30 percent of Americans see real estate as the best investment—up from just 19 percent in 2011.
A new survey by the Pulte Group echoes such sentiments: 35 percent of Americans reported that they would like to buy a home soon in part because they see it as a smart financial investment, said Valerie Dolenga, spokesperson of Michigan-based home builder, Pulte Homes.
This kind of growing confidence should make us all wonder, though: Haven’t we learned anything from the housing crash? One of the big takeaways from the crash was to avoid this exact line of thinking…
Now that the market is recovering, and home prices are growing again—in fact home prices are at an all-time high in nearly 1,000 cities across the country, according to Zillow—the siren song of seeing your home as an investment is becoming tempting once again.
Then four tips are offered to help ensure your home can be a decent investment: location matters, buy a home that needs some work so you can increase its value, “don’t buy the best house on the block,” and expect to stay in the home a while to allow the value to increase. In other words, a house is not automatically a good investment yet good planning can go a long ways.
At the same time, sentiment about seeing homes as good investments is not necessarily related to making bad choices about buying houses. In other words, we need to see how these beliefs become translated into actions. For example, more Americans may want to buy homes but if other pieces are not in place, such as good inventory or readily available mortgage credit, then this may not lead to another housing bubble. The bigger issue may come when everyone involved from buyers to lenders to the media gets caught up in a housing rush and it takes on an inertia of action that goes far beyond consumer sentiment.
Upper-income Americans are much more likely to say real estate and stocks are the best investment, possibly because of their experience with these types of investments. Upper-income Americans are most likely to say they own their home, at 87%, followed by middle (66%) and lower-income Americans (36%). Gallup found that homeowners (33%) are slightly more likely than renters (24%) to say real estate is the best choice for long-term investments.
Social class and wealth matter when determining what are viewed as good investments.