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Can Real Estate Save You If Stock Market Drops?

Performance Property Real Estate Question

Q: Lots of people say the stock market is overvalued. Does that make real estate a good bet? Leonard, Scotch Plains, NJ


A: I’m a real estate investor, so I think real estate is always a good investment so long as you choose the appropriate strategy for the current state of local real estate market you’re investing in. With more interest rate hikes on the horizon and inflation rising, some people are predicting a bear market for stocks–obviously a stock market decline is inevitable at some point anyway–it’s just that nobody knows exactly when it’s going to happen. Generally, real estate prices are not very well correlated with the stock market, which makes real estate a good hedge against stock market declines.

High end, luxury apartments are likely to be hurt by recession as renters become more price sensitive. REITs also will be hurt by recession and stock market decline because they generally are correlated with equities. The real estate sectors that will especially do well during recession or stock market downturn are commercial property connected with ecommerce, distressed real estate like bank owned properties and short sales as well as defaulted and non-performing mortgages.

Thanks for your question, Leonard. For more real estate information and tips visit my blog at geraldlucas.com.

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