For all the incredible trouble recently inflicted on the national real estate market, the ten-year return on real estate is still much, much higher than the nations traditional venue for investment: The stock market.
As of June 30 of this year, the ten-year return on the S&P has dipped into negative territory. With the recent sell-off this week, the market is now considered in the red for those unfortunate souls that had a long-term investment strategy in the stock market.
Indeed, just yesterday, the Dow Jones Industrial once again dipped below 11,000 in what seems to be part of a long-term downturn that shows little signs of abating.
While the overall return of real estate has taken a huge hit in the past few years in the national market, the return is nowhere close to flat over a ten-year time span – never mind in the red.
In New York City, for example, the return on a ten-year investment ending at the close of 2007 was 238.3%, on average. This is a solid return for just about any market, never mind one that many residents of the city already feel at home in – pun intended – and therefore do not have as high a knowledge barrier to active investment strategies.
A more active investment strategy in stock markets is a possibility, of course, but this carries far higher risk than holding real estate. Furthermore, an active stock-based investment strategy requires far more energy and focus than merely holding real estate investments.
An alternative is placing your money in the hands of an investment or money manager, but historically speaking, the investment risk is far greater than purchasing real estate in New York City, and few investment managers have been able to claim anything close to a 35% average annual growth rate over the past ten year period.
Perhaps most importantly, it is far from certain that the stock market will be even able to hold steady at current levels over the rest of 2008.
It’s an obvious conclusion, but an easy one to get to New York real estate is still merely one of the best investments out there. Purchasing a home or number of homes in up-and-coming areas may even lead to profits that far outstrip the 10-year average.