Americans prefer real estate over stocks, gold

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Gallup’s Economy and Personal Finances Poll last month asked Americans to choose the best option for long-term investments: real estate, stocks and mutual funds, gold, savings accounts, and CDs or bonds.

Results indicated more Americans (30 percent) now consider real estate to be their best option. In 2011, Americans chose gold at the time when it was at its highest market price and real estate and stock values were lower than today. Now, gold and stocks are both favored by 24 percent.

Bonds have been the least favorite choice for as long as Gallup has been asking the question; savings accounts and CDs were more popular in the past. Before 2008, prior to gold being a poll option and at a time when real estate and stocks were tanking, savings accounts were the most popular long-term investment.

This year, with the housing market improving across the U.S. and home prices recently rising after a steep drop in 2007, real estate prevailed. In 2002, during the real estate boom that preceded the mortgage crisis, half of Americans picked real estate as the best investment choice.

With stock values improving, aided particularly by the bull market in 2013, the 24 percent who regard stocks at the best option is also higher now, up from 19 percent in 2012.

It’s interesting to note that lower-income Americans are the only sub-group to favor gold. Those living in households with less than $30,000 in annual income favor gold over real estate by 3 percentage points, with real estate their second choice.

Upper-income Americans are the least likely to name gold, at just 18 percent.  They favor real estate (38 percent) and stocks/mutual funds (30 percent), possibly because of experience with these types of investments.

And, as might be expected, thirty-four percent of stock investors are more likely to favor stocks as opposed to the 13 percent who don’t own stock.

Young Americans (aged 18-29) are about evenly split with about one-quarter each choosing real estate, stocks, gold and savings accounts for long-term investments. However, the 23 percent who prefer savings accounts is much higher than the percentage giving that answer in older ager groups.

These differences could possibly be due to actual home ownership experience and familiarity with the real estate purchasing process. Also, these individuals have largely become financially independent during the years of volatile housing and stock market returns.

Implications?  With housing prices improving across the country, Americans are regaining faith that real estate is the best choice for long-term investments. But home ownership is also associated with views of real estate as an attractive Investment opportunity.

Those of you who have been reading my eNewsletter for awhile know where I stand on this issue. I personally put my money where my mouth is and have consistently beaten the stock market in terms of long-term gains.

Economist and Yale professor Robert Shiller told CNBC hat even though the housing market is showing signs of slowing, the recovery still remains strong.

“There is a certain, substantial amount of momentum in the housing market — much more so than in the stock market,” he says. “I think this boom we saw in the last year and a half in home prices has something to do with quantitative easing and the record-low mortgage rates.”

While there are certain signs of easing, with mortgage rates predicted to rise and building permits softening, Shiller doesn’t see these factors derailing the housing recovery. In fact, Shiller, who co-founded the Case-Shiller Home Price Index, says the futures market is predicting 25 percent higher home prices in 2018.

“That seems like a possibility,” he told CNBC.

A recent post in the Economists’ Outlook/Blog stated that the real estate industry has a significant role in the U.S. economy.  Historically, real estate and related industries have accounted for roughly 18 percent of GDP. Record low mortgage rates and improved prices have boosted consumer confidence and spending on housing and related goods and services.

All of this — high consumer confidence, home prices on the rise, low available inventory and mortgage interest rates still low — point to now being a great time to sell and trade up or look for buy for the first time or for investment property.

Harry A. Salzman, a 40-year real estate broker, owns and operates Salzman Real Estate Services Ltd. Contact him at 598-3200 or at Harry@HarrySalzman.com.