Have you heard this famous Wall Street saying: “The time to buy is when there’s blood in the streets”? This commonly-heard phrase means that in economic conditions where some people are losing money, others will find opportunities to invest.
So, is real estate the same as the stock market? Not exactly. But home buying can be a good investment during an economic downturn.
Here are three advantages to buying a home during times of inflation as well as economic downturns:
Hedge against inflation
While it’s possible for home values to decline, overall, real estate tends to appreciate in value over time. According to Forbes, the majority of the homes that hit rock bottom in value during the 2008 financial crisis returned to their pre-crash prices in less than a decade.
If you’re interested in buying an investment property, you will receive two anti-inflation benefits: monthly income from the property along with increasing equity in the value of the property itself.
Leveraging the value of the property
The biggest asset that many people have is their home. If you buy a home and begin to build equity, you can use the value of your home to make other investments.
Here’s how that works: if you buy $25,000 in stocks, you have purchased $25,000 in value. This value could increase or decrease depending on stock prices and volatility.
If you invest $25,000 in buying a house, you could receive $100,000 or even more in an increase to your net worth when home equity and tax benefits are taken into consideration.
Potential for income property
You may own your home and could be thinking about buying a second property as an income property. Or, you could be considering buying a larger home and renting out your current, smaller residence.
Both alternatives can provide you with income and the opportunity for increased real estate value. According to Investopedia, “a well-managed property generates income for owners.”
Buying a home during an economic downturn can seem risky. But if you’re developing a strong personal financial plan, you can work with experts like California Platinum Loans to discover the optimal home buying opportunities to secure your financial future.
Boykin, Ryan. “Reasons to Invest in Real Estate vs. Stocks,” Investopedia, 29 June 2021, url: https://www.investopedia.com/investing/reasons-invest-real-estate-vs-stock-market/
Dellinger, AJ. “Should you buy a house during a recession?” Bankrate, 15 March 2023, url: https://www.bankrate.com/real-estate/buying-home-during-recession/
Furhmann, Ryan. “5 Top Investors Who Profited From the Global Financial Crisis,” Investopedia, 10 June 2022, url: https://www.investopedia.com/financial-edge/0411/5-investors-that-are-both-rich-and-smart.aspx
Wieland, David. “Is Real Estate A Hedge Against Inflation?” Forbes, 28 September 2021, url: https://www.forbes.com/sites/forbesrealestatecouncil/2021/09/28/is-real-estate-a-hedge-against-inflation/