4 Real Estate Moves You Need To Make in a Bear Market
The current downturn has the stock market off by double digits on the year, but thanks to rising interest rates, investors are staring down a real estate bear market, as well.
Even so, there’s no reason to sit on the sidelines and wait out the storm. Even if you’re not in a position to buy a property, there are real estate moves you can make right now that don’t require you to own any physical land or structures.
In today’s bear market, real estate might just be the best hedge against sky-high inflation, a down stock market and crumbling cryptocurrencies.
REITs Are on Sale — and a Great Hedge Against Inflation
Real estate investment trusts (REITs) allow ordinary people to buy into large-scale real estate projects — including commercial, residential, debt, equity and infrastructure — without owning anything or shouldering all the risk.
Since the law requires them to pay at least 90% of their taxable profits back to investors as dividends, REITs are excellent income-producing investments — never a bad thing in times of fast-rising prices.
Unlike other alternative real estate offerings, you buy and sell REITs in shares on the open market, just like stocks, so you don’t have to commit to tying up your money for months or years. With many experts predicting that the current bear market will breed a recession, that kind of liquidity is more important than ever.
According to Fidelity, REITs are a perfect hedge against today’s high inflation because landlords adjust leases upwards when prices rise.
As a bonus, since stocks are down, REITs are down right along with them — which means they’re on sale. Some of the biggest and most respected REITs on the market were swept up in the stock downturn and are now trading at a steep discount. Digital Realty Trust (DLR), for example, is down nearly 30% on the year. Vornado Realty Trust has lost almost a third of its value in 2022.
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Chase Annualized Returns With Private Real Estate Investments
Crowdfunding platforms made it easier to invest in private real estate funds, which are typically closed to the general public — but many are open only to wealthy accredited investors. Even those that welcome small-time players require you to tie up your money for extended periods and tend to come with hefty minimum investments.
Concreit, however, separates itself from the crowded crowdfunding field by letting ordinary people buy in with no minimum investments — and every dollar invested is backed by real estate. There’s never a penalty against your principal for early withdrawals, although your dividend takes a hit if you bail within your first year.
Concreit’s current rate is an impressive 5.5% annualized return.
You Don’t Need To Be a Farmer To Invest in Working Land
An investment in farmland separates your money from the whims of the market more than just about any other real estate venture, making it one of the best diversification buys you’ll find. According to AcreTrader, farmland earns you money in two ways — through land appreciation and annual cash rent.
The average annual return is a mighty 11% and farmland investors enjoy famously low volatility. Not only is it a hard asset that provides a hedge against inflation, but it’s an investment that lets you build equity over time.
Thinking of Buying? The Best Thing You Can Do is Nothing — For Now
The red-hot housing market that dominated the pandemic years sent prices climbing to record highs. Buyers were priced out and forced to put in above-list offers to avoid getting locked into bidding wars.
For buyers who tried to wait out the storm, 2022 has been bittersweet. Although the market cooled and prices dropped, interest rates soared from historic lows below 3% to around 6% today.
Homes were cheaper to buy, but money was more expensive to borrow — basically, buyers got a wash.
According to Forbes, however, it might be worth their while to wait just a little bit longer.
Housing sales have declined for several months in a row, with new single-family home sales falling by nearly 17% between April and May alone. While there’s no indication that a repeat of the 2008 crash is imminent, Forbes predicts that a significant correction could soon send prices low enough to negate the effects of rising interest rates. With a bear stock market likely to lead to a bear housing market, patience is expected to pay off in the coming months.
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