The United States real estate market is still rebounding from its crash at the height of the Great Recession. The Federal Reserve continues to pump monthly stimulus into the system that currently benefits homeowners and it seems that Americans still feel owning real estate is a great tool to have in an investment arsenal.
According to a new Gallup poll, nearly one-third (30 percent) of Americans say real estate is the top long-term investment to have, which is significantly up from three years ago, when only 19 percent of Americans opted for real estate.
Other top long-term investments for Americans consist of gold (24 percent), stocks and mutual funds (24 percent), savings accounts and certificates of deposit (14 percent) and bonds (six percent). The results do vary based on income, though, as households earning less than $30,000 a year chose gold as the best investment resource (31 percent).
“With housing prices improving across the country, Americans are regaining faith that real estate is the best choice for long-term investments,” wrote Gallup’s Rebecca Riffkin. “But home ownership is also associated with views of real estate as an attractive investment opportunity. This leaves groups with lower home ownership rates, like lower-income and younger Americans, still looking elsewhere for investment options.”
Last month, the Federal Reserve published economic data showing the rise of median sales prices of new homes sold in the U.S. The information indicates that the average home price as of Feb. 2014 was $261,800, up from $204,200 in Oct. 2010.
Despite the significant rise in home prices, Nobel laureate Keynesian economist Robert Shiller warned in an interview with Yahoo! Finance that home values will increase at a slower pace because there “are some weak signs” but it does have a lot of “momentum.”
“I do worry. I don’t have a crystal ball. Prices may fall, but I don’t see solid evidence they’re going to fall,” Shiller said. “We have had more investors buying houses. They may be changing their minds now that they see momentum weakening. It’s not at all clear that momentum is a safe bet anymore.”
Late last year, Shiller, who is the co-founder of the Case-Shiller Index, portrayed the U.S. housing market as being in the early stages of another bubble, though he noted that it still has a while to go – citing some estimates that say housing prices will soar until 2018.
“In the housing market, it has its own momentum right now as people see it coming back. We’re sort of in the beginnings of another housing bubble,” Shiller told CNBC. “The key economic question facing housing is the Fed’s future course to scale back quantitative easing and how this will affect mortgage rates. We have a futures market that’s predicting the increase won’t stop until after 2018 so we still have time to go, but it might be weaker.”
Whatever the scenario for the housing market is, a new study has found that it might be more affordable for Americans to purchase a home rather than rent.
A new Harvard University report has found that more Americans are renting but a smaller number are finding it affordable. As of 2013, 41 million households were renting, but more than half were paying more than 30 percent of their personal income – affordable housing should be no more than 30 percent of one’s budget.
In some cities, some households are doling out more than half of their budgets in rent.
With the number of rents increasing, the competition for rental spaces continues to go higher, but wages have either remained the same or diminished for a lot of workers, which is making it extremely difficult for the average household to get by.
