Real Estate is still the top long-term investment choice

Posted by Gary Hoeferkamp, June 20, 2023

According to a Gallup poll published last month in USA Today, more Americans continue to name real estate than stocks, gold, savings accounts/CDs, or bonds when asked which is the best long-term investment. Thirty-four percent of Americans chose real estate this year, down sharply from last year’s record-high 45%. However, at 34%, it is on par with the typical proportion selecting real estate from 2016 to 2020.

The perception that gold is best has nearly doubled, rising from 15% in 2022 to 26% today. As a result, gold has overtaken stocks for second position. While I personally believe that residential real estate should be a substantial portion in most people's asset mix (I like home equity at 15-40% of total assets), long term stock gains tend to outpace home gains in the St Louis area, unless factoring in leveraged gains (borrowed money), which can be a better average "return" than stocks.

When the survey asked about home price expectations, 71% in 2021 predicted local home prices would increase over the next year, the highest percentage holding that view in Gallup’s trend dating back to 2005. Last year, a similar 70% expected home prices to increase. Right now, 56% still hold this view, while 25% believe prices will stay the same and only 19% think they will decrease.

The above results would indicate a home buyer surge is imminent, but wait! Homebuyers’ pessimism about market conditions has hit a new low. Only 21% of U.S. adults say it’s a good time to buy a house, a record low since 1978 when Gallup began conducting its annual poll. It’s down 9 percentage points from a year ago, and it's the second time the figure has dipped below 50%. Given this survey paradox, I am not sure when the responders think it will be a good time to buy, if they believe prices will increase in the short term, and it is the best investment in the long term. If waiting for mortgage rates to fall (my guess), that will simply push many more buyers back into the market, saturating the demand side, and likely keep the prices rising.

I suggest to hesitant homebuyers, to make your move in the second half of 2023, even if rates remain elevated, as I feel the odds are prices will be higher in 2024. That leads us to Housing Affordability. I plan to tackle that one next month, it is a biggie.

Here is an update on local, existing home sales activity as of today (June 20):

• Manchester had 2 homes available and 23 under contract
• Ballwin had 11 homes available and 55 under contract
• Kirkwood had 12 homes available and 61 under contract
• St Peters had 12 homes available and 86 under contract
• Arnold had 11 homes available and 36 under contract
• Florissant had 40 homes available and 107 under contract

The ratios range from 2.7 to 11 pending sales for every 1 available. Adding the total of these 6 areas is 4.2 pendings to every 1 available. That is as strong as it has ever been, mainly due to inventory dropping faster than the lower number of buyers. A normal market is more available homes than pendings. My last comparison of these areas in April was 3.1 to 1 (and 2.8 to 1 last June) with the available home supply DOWN 19% from May. Manchester was the big change this month, taking honors at an 11 to 1 ratio of pendings to available, and St Peters right behind at 7 to 1. I see prices climbing again, and some pocket skyrocketing like last spring.

We are looking to add a full time, licensed agent. Perfect for someone wanting a small office culture with easy broker access, no office politics and many learning/ sharing opportunities!

Watch for our Home Services Management company to open this fall. We will be interviewing for a service manager position soon. Please tell us if you have interest and experience in this area, or pass along someone who does!