Is Real Estate Investing Dead?

The circumstances may seem dismal, but the story is still unfolding.

Housing prices and rental rates are feeling the pinch as mortgage rates and inflation squeeze both buyers and renters.

A glance at monthly shifts in housing prices …

And a snapshot of the year-over-year changes in rents below (rental rates still rising, just at a slower pace) …

Note: Members of the The Real Estate Guys™ Investor Mentoring Club have heard us talk about the potential for the above roll over of rents to help bring CPI inflation data down (and mortgage rates) as the shelter component of CPI more accurately reflects the above real-time data.

As house prices and rental rates decelerate, does this mean real estate investors should head for the hills?

For context, it helps to consider that real estate is one asset class in a huge global ocean of investment opportunities.

To answer the question “Is real estate a good investment?”, you must ask, “Compared to what?”

In a stagflationary environment, where inflation is persistent and economic growth is stunted, finding secure investments is hard.

Some traditional options investors may consider …

Cash? Though high levels of liquidity is always smart in tough times, inflation takes a big bite out of cash’s purchasing power.

Treasuries, CD’s, Bonds? Yields are still below inflation even after historic rate hikes.

Stock market? Corporate debt is in a precarious situation and labor and goods inflation is squeezing margins. Customer pricing can only absorb so much on a weakening consumer before sales drop. We’re already seeing sweeping layoffs, not just in tech. Bankruptcies on the rise. Perhaps dividend-paying, commodity-based, value stocks may be a place to hide for some, but try this …

Search “How to invest during stagflation” and you’ll find out that what comes up over and over again as one of the top assets to hold during times of stagflation is …

Drum roll, please …. REAL ESTATE! (Another stable hedge in tough times is Gold and Silver).

Let’s take a long-term look at how volatile rental income can be …

Hmmm … Some periods of acceleration and deceleration, but not too crazy. And there’s been plenty of shockwaves that have hit us over the span of history since 1940.

Real estate is up against some strong headwinds currently, but our point is that so is everything else (even cash).

Every deal must be chosen carefully and local market performance will vary drastically. However, in taking a higher level view …

Real estate is clearly not an asset class to altogether toss aside during tough economic times.

As your family prepares to celebrate Easter, remember real estate is NOT dead. Carefully underwritten stable real estate cash flows that support a diversified portfolio is a safe haven asset.

Cheers to Renewing Hope for Real Estate!