Why Real Estate Will Be Different Than the Stock Market in 2021
The so called experts should stop treating Real Estate like a stock.
I hate to say it, but the doomsayers have it all wrong when they talk about the real estate market and its impending demise. The demand for Real Estate is here to stay and the so called experts have to stop treating it like it is a stock.
During the pandemic we have been witness to varying world markets. It’s seems that the stock market changes every time that Donald Trump eats McDonalds which is daily. Billions of dollars’ worth of stock rises and falls with the mere mention of COVID-19. Maybe a vaccine has been found, maybe not, cases are on the rise and then they are not. This has been a dizzying process for the last 7 to 10 months and I think the world is just sick of being sick.
But the one thing that has remained consistent is Real Estate. For clarity I am going to refer to residential Real Estate for now, not commercial Real Estate. That will be a totally different rant and one you will not want to miss.
So let’s take a hard look why these so called experts want to doom the Real Estate Market. I think it is best that we look at the market as a whole at this time, basically Real Estate is in sync around the world due to the pandemic. It has gone from being a tradeable commodity to a life necessity. The governments did not order the world to stay in your portfolio, to hold up in your Amazon stock – no they said stay at home.
The entire world was told to stay home, from the flats in London to the lofts in New York City, to the walk ups in Sydney, to the townhomes in Toronto and to the ranches in Texas – stay at home. Now I will agree, for years Real Estate had a cycle but after the last major correction in the market in 2007, there has been something different in the mirror. Real Estate began to look different, feel different and people started to appreciate it more. There may be so many different looks to Real Estate, Condos , Townhomes, Semi-Detached and Detached. Yes they come in all shapes and sizes, but across the world of Real Estate, there was a new appreciation for it. Fast forward to the start of the pandemic and now we have the greatest demand for safety and where does that come from? Your home.
I am sure there are those that believe that the condominium high rise market is doomed, that all the major cities in the world are going to become ghost towns. People that speculated on the shoe box in the sky and were planning to put it on Air BNB and make their riches are now selling off their properties.
Perhaps the market is going to soften in some of the major hubs. Yes I might even go as far to say that the Air BNB speculators are not going to do as well as they hoped. The fact is, nothing is going to be the same as it once was. The life we all knew and lead will not return. Our “BC” life, before COVID is gone, but there will be a shift in ownership and the tall towers will definitely prosper in the future. Now don’t get me wrong, I am not a huge believer in speculation. I think everyone should play the long game in Real Estate and if you are going to own investment real estate, you do it long term.
So how will the high rise market stay alive? Simple, the current interest rates have made a mortgage the most affordable it has ever been. These rates, according to the US FED and the Bank of Canada are going to stay low for at least the next 3 years and perhaps longer. So the fence sitters, the first time buyers and the new immigrants will absorb the inventory. There was a worldwide inventory shortage in Real Estate before the pandemic, why does anyone think that is has been solved during the shutdown crisis. In fact all it has down is fuel the narrative for people to live in a place they call home, rented or owned this has never been more apparent.
So where does this leave us, you know with people that believe that Real Estate is going to tank and the almighty stock market is truly the place to be. The ones that leave their cushy office and drive out to their big home in the suburbs. The ones with a portfolio that could implode at any moment but can take solace that they own their home. Yes, those people and yet they still want to treat Real Estate like a stock. Now don’t get me wrong, there are REITS, which are Real Estate Investment Trusts and they are a stock which is secured by Real Estate. But for most people, the ones that own a home or perhaps an investment property, these are the ones that have confidence in their future. Not only is their investment going to be secure for a long time, they or their tenant can call it home and know that they are safe. That is a hell of a lot better than owning some stock.
So before anymore so called “experts” call a Real Estate crash, go home, look around your neighbourhood, listen to the news when they tell you to stay home and realize that you are not sitting in a stock, that you are sitting in something that is far more important and maybe only then you will realize what Real Estate truly is
Todd C. Slater is a Top Real Estate Expert. He is President of The Simple Investor and The Simple Landlord and Host of the #1 Real Estate Talk Show in Canada – Simply Real Estate on Newstalk 1010 and the iHeart Radio Network.