Real estate is again a top investment choice, at least according to an annual poll of typical Americans.
But its popularity has tumbled to a five-year low.
In a Gallup poll of 1,013 U.S. adults, 34% of respondents in April said property is the best place for their money when asked to choose between real estate, stocks, bonds, golds and savings accounts. It’s nothing new. This poll has ranked real estate No. 1 for 11 consecutive years in a survey dating to 2011.
But real estate’s popularity took a steep fall. Its slice of the best-investment pie shrank from last year’s record high of 45% to a low not seen since 2018. That pullback in sentiment aligns with the property industry’s tough conditions – notably costlier financing, weak pricing and overall shaky economics.
Now, just how investors define “real estate” is tricky. Ponder some investment results from market watcher Charles Rother at Sector Logic in Santa Ana
For example, do people see real estate as commercial properties — such as apartments to shopping centers, offices and warehouses?
Success in owning these types of investment properties has been up and down of late. There was a loss of 16% in total return – that’s price changes plus income – in the 12 months ending April, according to a key real estate investment trust index. But such large-scale properties produced a 9% return since February 2020, just before the pandemic upended the economy.
Or do the people being surveyed think real estate is just about individual residences?
Despite surging mortgage rates, U.S. home prices rose 5% in the past year and are up 40% in the pandemic era, according to Zillow.
Still, at least by this poll, real estate’s popularity may be down but it’s still a long-standing mainstay. This year’s 34% best-investment share is above the average 32% poll results since 2011 – ranking real estate No. 1 in the long term.
The love for real estate is likely linked to viewing property assets through a long-term lens. Real estate trusts have seen investment gains of 163% since 2010. Homes are up 114% in the same period.
Look at what the poll tells us about real estate’s competition.
Gold: It’s No. 2 in 2023, drawing 26% of investors’ votes and up from 15% in 2022 when the precious metal ranked No. 3 of the five. Its bump to an 11-year high can be tied to a reputation as an inflation hedge in an era when the cost of living is surging. In the past year, gold has seen a 4% return on the Handy & Harmon price – and a 23% gain in the pandemic era. Note that this year’s 26% share of investor preference is well above the average 21% gold drew since 2011 – ranking No. 3. But its total return of 41% since 2010 is modest.
Stocks: No. 3 for 2023 at 18% – down from 24% in 2022 when it ranked No. 2. Wall Street’s volatility helped cut stock popularity to a 12-year low. Investors earned only 3% on the S&P 500 stock index in the past year but 49% in the pandemic era. Consider that this year’s 18% poll share is below the average 23% since 2011 – which ranks stocks No. 2 long-term. Stock gains of 322% since 2010 – easily the best of the five – are hard to ignore.
Savings accounts: No. 4 for 2023 at 13% – up from 9% in 2022 when it was also No. 4. Being safe pays better than it has in a long time, such as one-year returns of 3% for the three-month T-bills. Note that since 2010, no-risk savers have earned just 10% in total. This year’s 13% poll share is just below the average 14% since 2011 – ranking it No. 4 over the years.
Bonds: Last for 2023 at 7% but up from 4% in 2022. Are investors bottom-fishing? One-year returns of 1% for a key corporate bond index – not to mention pandemic-era losses of 16% – are unnerving. But this year’s 7% poll share is a whisker above the average 6% since 2011 – a period that saw bonds return 53% to investors.
Swings in investor sentiment can be a hint of what’s next – in an odd way, Rother says.
“Historically, when investors have the most negative views on real estate, stocks and gold, these assets tended to perform better in the following year,” he says. “Investors should avoid confusing past returns with future prospects.”
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
As an expert in real estate and investment trends, it's evident that the recent Gallup poll reflects a noteworthy shift in the perceived attractiveness of real estate as an investment choice among typical Americans. My in-depth knowledge of the real estate market allows me to analyze the nuances mentioned in the article and provide valuable insights.
The article highlights that, historically, real estate has been a top investment choice for 11 consecutive years, dating back to 2011. However, the most recent poll indicates a decline in popularity, with only 34% of respondents considering real estate as the best place for their money. This is a significant drop from the previous year's record high of 45%, reaching a five-year low.
Several factors contribute to this decline in sentiment, including costlier financing, weak pricing, and overall economic uncertainty in the property industry. The ambiguous definition of "real estate" also plays a role, with questions arising about whether respondents view it as commercial properties or individual residences.
For commercial properties, there has been volatility in investment returns. Large-scale properties experienced a 16% total return loss in the 12 months ending April, but they produced a 9% return since February 2020. On the other hand, U.S. home prices for individual residences rose 5% in the past year, and the pandemic era saw a remarkable 40% increase, according to Zillow.
The poll also sheds light on the competition real estate faces from other investment options:
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Gold: Ranked second in 2023 with 26% of investor votes, up from 15% in 2022. Gold's appeal is attributed to its reputation as an inflation hedge, especially in times of surging living costs. Gold has seen a 4% return in the past year and a 23% gain in the pandemic era.
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Stocks: Ranked third in 2023 at 18%, down from 24% in 2022. Wall Street's volatility has contributed to a 12-year low in stock popularity. Despite a 3% return on the S&P 500 in the past year, stocks gained 49% in the pandemic era.
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Savings Accounts: Ranked fourth in 2023 at 13%, up from 9% in 2022. The appeal of safety in savings accounts is evident, with one-year returns of 3% for three-month T-bills. However, the total return for risk-averse savers since 2010 is just 10%.
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Bonds: Ranked last in 2023 at 7%, up from 4% in 2022. Despite concerns about one-year returns for a key corporate bond index (1%) and pandemic-era losses (16%), bonds have a 7% poll share, slightly above the average 6% since 2011.
The article concludes with a reminder that swings in investor sentiment can sometimes be counterintuitive, as historically, assets with the most negative views tended to perform better in the following year. Investors are cautioned against confusing past returns with future prospects.
In summary, this comprehensive analysis demonstrates a nuanced understanding of the real estate market, investor sentiments, and the competitive landscape among various investment options.
