Is investing in real estate overhyped? The short answer is, ‘yes’. But that doesn’t necessarily make it a bad investment. It is more a testament to how real estate investing is portrayed in popular culture and the media. Here is what you need to know about investing in real estate in 2022—and the best options available to you.
Why is everyone investing in real estate?
It is true, it seems like pretty much everyone is investing in real estate—or wants to. Consider the numbers. In 2018, there were over 13 billion searches for real estate. In the US, 31% of people between the ages of 50 and 64 watched at least one HGTV show in the last month. And the younger generation seems keen to get in on the act, with 55% of millennials surveyed saying they want to invest in real estate.
One explanation for why so many people are either investing in real estate or want to invest in real estate is that it has been put on a pedestal in popular culture and the media. HGTV offers more than 100 programs about real estate, with everything from flipping houses, to building custom decks, to purchasing property in foreign countries.
There is no getting around it: real estate can be a solid investment. But for the sheer amount of coverage it receives, it can’t help but be a little overhyped.
Is investing in real estate a good idea in 2022?
There are a few reasons why investing in real estate could be a good idea in 2022. Projected home value appreciation growth was at 19.5% in 2021. In 2022, home value growth will still reach 11%, making it one of the stronger years on record. In fact, this year home sales should reach roughly 6.35 million, which marks the most home sales in about 16 years.
Another reason is that demand for rentals will likely increase. 2022 could be a great year for you if you want to buy real estate to earn money through rental properties, due in part to increasing home values impacting the rental market. This, in turn, will price many homebuyers out of the market. When real estate supply increases and prices normalize, rent could be too pricey for some people, and many potential homebuyers could find down payments too hefty. As a rental investor, so many people opting to stay in the rental market longer will be a good thing for you.
Reasons to reconsider real estate investing
One reason you may want to reconsider real estate investing is that you might face some competition and be drawn into bidding wars. In April of 2021, for example, Redfin found that 74.3% of offers faced competition versus 58.8% in August 2021. Eventually, competition lessened when potential buyers grew weary of high prices and the market decreased.
Another reason to reconsider investing in real estate is that 2022 is likely to be a seller’s market. Low supply and high demand mean that in areas that are popular for remote workers you will likely still have problems with supply, especially in the warmer months, even after years of underbuilding.
Are stocks better investments than real estate?
The short answer is ‘yes’, stocks are generally a better investment than real estate. For most people, it is better to invest in stocks than in physical real estate, especially when you adjust for time, effort, and risk. Consider investing in real estate and investing in a fund. When you purchase a property, you may spend, say, $500,000, on a single project. That makes it nearly impossible to actually diversify with real estate. If you invest in a stock market fund, on the other hand, you can invest in over 8,400 companies around the globe—at a cost of under $70. In other words, you are putting all of your eggs in one basket when you are investing in real estate. Not to mention the high operational costs that can come with it, especially compared to stocks.
