Real Estate Is (Still) a Strong Investment

Perspective on Last Week’s Rate Hikes

Last week, as stocks rallied, money pulled out of the bond market and mortgage rates went up a quarter-point. What does the rate hike mean in terms of dollars? That for every $1,000,000 a buyer borrows it will equate to an additional $2,000 annually ($166/month) in terms of payment. It sounds significant; however, it’s the same rate they were last November—and still less than rates in July 2015.

That said, the current market provides a great opportunity to buy or sell a property. In fact, it’s markets like this when the opportunity happens as the projections are we about to enter an inflationary period. And real estate is the best hedge against inflation — meaning real estate is one of the best investments to be made.

From a macro point of view, as interest rates increase, then we are likely to see more investment into the U.S. economy because globally there are negative-interest rates, thus making the U.S. a better place to put ones money. Plus, even if there are continued rate hikes, money is still cheap to borrow. Cities like Los Angeles, San Francisco, and New York are a slightly more protected from a downturn as these regions have been growing for decades and will likely continue to do so in the coming decades.

In our office, we  refer to the Morningstar Andex Chart to educate our agents and clients. “Starting early and investing consistently over long periods of time history suggests that markets can be resilient—especially for those with the patience to stay invested.” [1]

[1] Go the Distance: The Andex Chart Story

screen-shot-2016-11-17-at-2-04-32-pm