Millennials are often bombarded with messages about how real estate investment is the path to wealth. But is investing in real estate really a safe bet for this generation?
After all, we’ve seen the effects of the last housing crisis firsthand. But the housing market is much different now than it was back in 2008. These days, incentives for purchase are empowering millennial homeowners—especially women.
The stability of the market, recent market conditions, and benefits of homeownership all determine how lucrative real estate investment actually is. By exploring these factors, you can get a better sense of whether or not buying a home as a millennial in 2021 might be right for you.
The Stability of the Market
As a millennial, your first question when it comes to investing in real estate is probably “how safe is it?”
Millennials have been burned on the economy. We’ve watched our parents struggling from the 2008 housing crash, and now, the pandemic causes uncertainty in the global marketplace.
Housing costs are rising. But interest rates are low. For some, the market is looking better than ever, while for others, questions and concerns linger. It’s no wonder that with so much competing evidence, millennials aren’t sure if real estate is safe.
But the reality is that real estate is almost always a safe bet. Sure, you can make a bad investment in a specific property or location, but real estate itself is a much less volatile and risky option than other popular investment types.
This may come as a surprise if you are a millennial. After all, we’ve lived with proof that the housing market can be volatile most of our lives. But the truth is that real estate is a market often protected from larger economic challenges.
In fact, real estate has only taken a hit during two of the last five recessions (not counting the one we’re in). Most prominently, the 2008 recession was caused by problematic practices like selling subprime and adjusted-rate mortgage products. This created a bubble of artificially inflated value that was bound to pop.
When the mortgage crisis finally hit, it affected just about every other industry, spiraling the economy into a downturn. Because the culprit had been the housing market, real estate saw some of the worst of the damage.
During this COVID-caused downturn, however, we’ve seen rampant real estate appreciation in many markets, translating to greater wealth for the millennials who have already invested. And the growth isn’t based on sketchy lending practices. Instead, millennial buyers are expertly qualified and interested in real estate investment, with one in six holding more than $100,000 in savings.
Nevertheless, recent market conditions might give you pause when it comes to making a real estate investment decision.
Recent Market Conditions
Home prices have been rising and they’ve been rising fast. At 10.4% higher than they were in 2020, average home values are climbing more quickly than many buyers can keep up.
This is great news for existing homeowners and real estate investors. With higher housing prices, the more likely you are to get a great deal on a sale or the rent rate you charge your tenants. But these conditions have also made buying a home more complicated.
Right now, housing markets in many parts of the nation are trending to favor sellers. This is due to a combination of many factors, including:
All these factors are stimulating demand for housing while keeping inventory low. Skyrocketing prices in many markets aren’t a product of risky lending standards but are instead natural results of a market with low supply. This might be a barrier of entry for would-be investors, but it is also an indicator that a volatile crash is not going to happen again. Rather, moderate price corrections are more likely.
For many millennials, however, these market conditions are just more factors making homeownership difficult right now. We already tend to carry high levels of debt, need less space, and face tighter lending standards than previous generations. A highly competitive housing market only adds to the challenges of making a lucrative investment.
However, for millennials that can, investing in real estate can offer all kinds of benefits.
The Benefits of Real Estate Investment
Real estate investment can be a great way to secure your financial future. This is because real estate is a consistently stable and high-value asset to have in a portfolio that will always be in demand no matter what other products, fashions, and lifestyles are trending. In turn, real estate is safer during economic change and can tangibly improve your net worth.
Here are just some of the benefits real estate investment can provide for millennials:
These benefits are enough to make a real estate investment desirable in any economy. However, you’ll need to consider the essentials before buying just any investment property. Explore niche property types, prepare your investment strategy, and secure your ideal financing.
Every millennial can benefit from investing in real estate, but not every location is a good bet. Look for markets that haven’t changed too much during recent housing booms and involve an expert team in your investment decisions. Then, follow these methods for investing right.