Investing in Real Estate – Does it Pay off in 2015?

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Opinions of experts and the public collide on the question of real estate being the best long-term investment. This topic is quite hard for both experts and regular Americans to grasp, especially after the housing problems that were a trigger to 2008 Economic crisis.

What Americans Think?

When it comes to public opinion, Gallup poll done in April last year says that 30% of Americans think that real-estates are the best long term investment. Number of people who think this way started rising three years ago, and from 19% of American citizens who preferred real estate as the best long-term investment in 2012 it rose to today’s figure during this short period of time. Real estate was mostly picked by upper-income citizens (from whom 87% own their homes), while the lower-income Americans still consider gold as the best long-term investment.

Real Estate Market Changes

This market saw a lot of ups and downs in previous decade. We all remember the big collapse that happened from 2007 to 2009. Since then a lot of things changed and American construction and real estate industry is back on its feet again. Commercial real estate industry has been on solid ground for some time now, and same goes for the whole US economy. With economy growing we’re seeing an increase in real estate investments in almost all property types and markets.

One of the property types that saw an increase, but unlike other types of real estate had very slow and inconsistent pace is the single family housing sector. On the other hand, luxury homes sector grew for almost twice as much percentage and with its 8% increase it was the sector with the best return in 2014, according to Sotheby’s Global Luxury Residential Real Estate Report.Maybe buying a real estate is not such a bad idea after all. It is very important when it comes to real estate purchase is to check all the licenses and to make sure that conveyancingissorted out so there are no complications during or after the deal.

Here are some of the new trends that will shape the real estate market in United States and Canada in 2015, according to the Urban Land Institute. We only listed the ones that are important for people who’d like to invest their savings in housing.

  • Rising Popularity of 18 Hour Cities– Twenty years ago we saw the diversification between 9-5 and 24 hour urban markets, with later being very popular among investors. The term 18 Hour City is a variation on the subject and it represents the part of downtown that’s quiet in the late night, but it’s buzzing during the working hours and the evenings. Best examples of this trend are the downtown areas of: Denver, Charlotte, Brooklyn and many other American cities and boroughs.
  • Big Generation Switch– Millennials are currently entering the game of real estate. There are different assumptions on how this 77 million big cohort will influence this market, that go from further gentrification of downtown areas to them moving to suburbs to raise their families when the right time comes.
  • Downsize in Number of Office Facilities– With the new technology entering the game, lots of people will start working from home, and companies won’t need big corporate buildings, with lots of offices and even more cubicles. Another important thing is that offices will gradually move from suburban areas in the new and gentrified city boroughs.
  • Lower Risks (but They Still Exist)– America is becoming more diversified when it comes to both economy and real estate market. This enables international capital to jump in and save the day in case of some big economic turmoil like the one that happened in 2008.
  • Single Family Housing Sector Featuring Slow and Realistic Growth– After a big mortgage bubble burst this is the only way this part of the market can become healthy again.
  • Fearing the New Bubble Event– Since 2008 any kind of growth comes with a lot of concerns about another recession and mortgage crises.

What Experts Think?

Different experts have different opinions, but most of them agree that real estate is not such a good long-term investment as most Americans think. Economist Robert Shiller thinks that real estate prices are very stable and because of constant advance in construction technology they rose for only 0.2 percent during last 100 years before the big housing boom started in 1991. David Reiss, research director of Center for Urban Business Entrepreneurship at Brooklyn Law School, also mentioned the large amount of money people are losing on operating basis while paying off such an expensive property in the interview that he gave to USA Today.

What Should You Do?

Buying real estate can bring some funds over longer periods of time, and renting it later is another great way to earn money, since renting profits saw an increase during last year, especially in the downtown areas. Also for this purchase it is easy to use bank’s money which can increase overall return on the investment. It also comes with tax free cash flow later as well as possible tax deductions on other sources of income that can be deducted with smart strategies of property management. In the end buying real estate can be great as a retirement plan, since most of American citizens are bad at saving money for rainy days.

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