The first half of 2022 has not been kind to stock and Cryptocurrency investors. In fact, it’s been quite the roller coaster ride.
With record inflation at home and escalating tensions overseas contributing to declining stock values and panic-driven sell-offs, investors have notable reason to guess second where they’re placing their investments.
After all, it’s not a question of if the market will crash entirely; it’s a question of when it will.
When the stock market crashes, it’s not just the value of stocks that plummets—it’s the value of every type of investment. That’s because a stock market crash is usually accompanied by an economic recession, affecting businesses across most industries.
However, some investments tend to weather economic downturns better than others. One of them is real estate.
3 Reasons Why Real Estate Is A Safe Haven During A Market Crash
Although the value of real estate may fluctuate in the short term, it has a history of bouncing back after stock market crashes.
In fact, many investors view real estate as a safe haven during times of economic turmoil.
The only president in American history elected for four terms certainly saw it as one, notably stating:
“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” Franklin D. Roosevelt (32nd President Of The United States)
Franklin D. Roosevelt, who assumed the presidency during the lows of the Great Depression, knew a thing or two about safe havens during times of trouble.
But, is real estate still a solid investment amidst today’s market uncertainty? And how would it fare amidst a recession?
Here are three reasons real estate investments are safe havens when stock values and cryptocurrencies tank.
Reason #1: People Will Always Need Somewhere To Live
Simply put, people will always need a place to live. And as long as there’s housing demand, real estate’s value will eventually recover if it does give any during a market crash. This leads us to reason #2.
Reason #2: The Supply Is Not Keeping Up With The Demand
Thanks to the pandemic and a new generation of homebuyers entering the market, the demand for housing has increased significantly in recent years. In contrast, the housing supply and new home builds have not kept up.
This has led to major inventory shortages across most major U.S. cities, especially in the Sun Belt states, where a good deal of remote workers have flocked to.
We’ve discussed this in-depth in our article on why Austin is a worthy market for investors that you can read here.
Reason #3: Real Estate Is Local While Stocks Are National
While stock investments are impacted at a national, sometimes even global level, real estate is generally more locally driven. If the demand locally supersedes the inventory, which it likely will continue to do so until builders can catch up, local markets shouldn’t feel the same pressures that the national stock market is feeling today.
Now that you understand why real estate is a safe haven amid the stock market and Cryptocurrency turbulence, you might be wondering if it’s still a safe haven amid a recession as well?
If so, we’ll discuss this next by addressing the elephant in the room…
Are We Headed Towards Another 2008 Recession?
When it comes to the economy, it’s always helpful to remember the old saying, “history doesn’t repeat itself, but it often rhymes.” With that in mind, let’s consider why another 2008-style recession is highly unlikely in the near future.
First, it’s worth noting that the financial crisis was caused by a perfect storm of factors that are unlikely to be repeated anytime soon.
A confluence of lax lending standards, over-leveraged consumers, and risky mortgage-backed securities created the perfect conditions for a crash. While there are always potential risks in the financial system, it’s unlikely that all of these factors will line up again in quite the same way.
Second, policymakers have learned from the mistakes of the past and put in place a number of safeguards to prevent another meltdown.
For example, banks are now required to hold more capital on their balance sheets, which gives them a cushion to absorb losses in case of a downturn. In addition, stress tests and other measures have been put in place to ensure that banks are prepared for tough times.
And finally, the job market has also recovered and is now much healthier. This means that there are fewer people who are at risk of losing their jobs. As a result, the economy is in a much better position now than it was in 2008, meaning there is less chance of another housing crisis of that magnitude occurring anytime soon.
With this all said, while some markets may certainly experience a cooling-off period, the continued high demand met with low supply means that a repeat of what happened 14-years ago is very unlikely.
Looking For A Safe Haven Investment That’s Not Stock Or Crypto?
Red Oak Development Group is excited to offer investment opportunities in multiple real estate developments throughout the Austin area. Our team brings decades of experience in land and real estate development to our investors, ensuring a smooth and profitable process.
The Austin area is a dynamic and growing market, making now the perfect time to invest in a real estate development project here. Our current and future projects are tailored to fit the needs of this growing market, delivering high returns on investment.
We would love to tell you more about our projects so you can see how they fit your investment goals.
