Wise investors are looking for a place to grow their money, weighing a good return vs. risk. In 2008, the Global Financial Crisis threatened both the stock market and property values. Investors were left stuck with billions of dollars disappearing from the national economy overnight.
Now with home values rising again, money managers need to re-evaluate which investment offers the option – stocks or real estate. Let's look at the historical return of each since the peak of the Global Financial Crisis, ("GFC"), in 2010 and which has fared better.
Remember, this article cannot offer specific financial advice, but instead identifies general trends. Any decisions on personal investment should be made with consideration of personal circumstances that are beyond the scope of this article and in conjunction with a licensed financial advisor and/or an accountant.
Improving Home Values
Since hitting rock bottom in 2010, home values have dramatically risen in the last six years. According to Redfin, some markets are now up +43% since January 2010. For those savvy investors that had the money available, property investments in those days offered a massive return.
The rest of 2016 and 2017 do not guarantee that national home values will continue to rise at the same rate. In fact, indications are that home values might level off if interest rates rise. That doesn't mean that stocks are automatically a better choice, but it does mean that investors will have to do more due diligence before investing in property.
Stock Performance
According to Redfin, the median portfolio performance in a similar time frame (2010) saw an average of 60+% return. The numbers are fairly consistent across geographies. These numbers indicate that generally, investors were better off putting their money back into stock market portfolios after the GFC than in property.
Of course, this is a general rate of return and does not account for over-performing or underperforming portfolios.
Appreciating Markets
However, there were some housing markets that beat the stock market over the last six years. These are likely the source of the popular stories of a lucky homeowner buying a veritable gold mine in 2010 only to sell it for a huge increase a few years later. As we'll see, this was the exception rather than the rule.
In particular, California and Florida had the most productive housing markets based on rising home values. Out of 25 markets evaluated by Redfin, four showed a greater than average rate of return:
- San Jose, CA
- Miami, FL
- San Francisco, CA
- Oakland, CA
Homebuyers looking for homes in these markets can probably attest to the high prices that these markets are demanding. For those that were able to buy early, they've quite likely earned a very nice return on their investment from 2010.
The bottom performing markets of the 25 that were assessed might present an opportunity for the investor looking at long term recovery.
- Raleigh, NC
- Durham, NC
- Baltimore, MD
- Philadelphia, PA
Remember, always consult with your financial planner before making any investments.
Pacific Union Financial
Pacific Union Financial, LLC is a full-service mortgage lender providing mortgages, refinancing, and loan servicing across the country and around the corner. With expertise in home loans for credit levels from best to bruised, we'd love to help you enjoy all the benefits of homeownership. Get in touch today and let us show you how we work hard to make mortgage easy.
Contact Jennifer Dierkhising at 866-672-3804.
