Being a resident, I have experienced Denver’s hot housing market first hand. All residents can attest to the fact real estate has a short shelf life in this town. An influx of out of state buyers who regularly comes in with cash to quickly buy up our already low housing inventory. I have always wondered where this cash is coming from. Are buyers liquidating investment assets to purchase a home in Denver under assumptions of continued year over year real estate appreciation?
As I discussed in my last blog, investor participation in the stock market is at an all-time low. Does this mean investors are stock piling hordes of cash for future use? No. We know people are still investing with hopes of better returns than what is earned in their savings accounts. So, who are the recipients of these funds? According to Gallup, real estate is the current preferred driver of net worth. When looking at the chart below, I would have to say that Americans’ view of the stock market as the best long-term investment option is changing.
Over the past few years there has been a steady increase in real estate investing. Thirty-five percent of Americans now choose real estate over stock and mutual funds. Both asset classes suffered catastrophic losses during the great recession and both have now recovered to well above their pre-crash highs. But Americans now seem to have more confidence in real estate than the stock market. I hope they understand the risks associated with direct real estate investing; illiquidity, expensive to exit, high entry price… but that’s for a later discussion.