BUT, we know that true investors shouldn't run and hide during a crisis....they should run towards the opportunity.
The opportunity, I believe, lies in Real Estate. The average American citizen has been significantly affected by the economic downturn, and because of these events (that began in 2007) there has been a great transfer of wealth and a dramatic shift in American psychology. Unfortunately several Americans have lost their homes and severely damaged their credit scores. This will delay them in qualifying to purchase another home anytime soon. In addition, some Americans now are nervous about buying a home because of the uncertainty of their own employment status.
Therefore, most Americans will most likely rent versus owning a home in the long-term future. College graduates (from 2008-Present) consider renting versus buying their own home...that is, if they do not elect to move back in with their parents/guardians. The job market has been shaky for a while...and a shaky job market decreases one's appetite for risk in owning a home.
America has, or is becoming, a renters' society.
Other factors that support this claim are below:
- Real Inflation is on the rise
- Incomes have not kept up with the real rate of inflation
- Tax increases on individuals are inevitable
- Average career change in a lifetime for new grads is between 7-11
- The costs for going to college is becoming too expensive
- The average college student's debt is between $25,000-$27,000
- There has been a general decline in credit scores
Wealthy investors, institutional investors, and individuals that have the ability to purchase real estate - should do just that. Buying real estate at today's prices is like buying clothes off the clearance rack that's marked 40% off. Interest rates for financing are below 4% and there are several homes to choose from in almost every city. I do not think that there is a market for short-term investing (you know, flipping houses for profit), however, I do think the market is ripe for long-term investors looking to acquire real estate.
Diversifying out of the stock market into real estate is a good way to generate cash flow for the future. We all know that Social Security in its present form is something we can't rely on. Therefore, we must build our own Social Security while we're young and able to work - because one day we may not be so able....or so willing. Owning rental property can help build your wealth over time...and now looks like a good time to buy.
These are just my thoughts based on the facts!