Bricks to Bullion: Investors Ditch Real Estate for Gold

Real estate has traditionally been regarded as a safe and lucrative investment. However, according to a new Gallup poll, economic uncertainties, sky-high property prices, maintenance costs, and lingering fallout from COVID have put a dent in its shiny reputation.

The new poll shows that 35% of Americans name real estate as the best long-term investment when given options including bonds, savings accounts or CDs, stocks or mutual funds, and gold. That's quite a decline from last year's record high of 45%.

So what's the deal with real estate losing its charm?

Well, for starters, buying property has become a serious challenge. Crazy-high housing prices have made it tougher for regular folks, especially the younger crowd, to jump into the real estate game.

I can't say I blame them. The average price of a house in the U.S. jumped 72% between 2020 and 2022.

Average Sale Price of New Homes Sold in the U.S. From 1965-2022

Source: Statista

According to Zillow, the average value of a California home right now is $728,121!

And that's down 3.4% over the past year.

But soaring property prices aren't the only one thing turning investors away from real estate.You'll Never Be On The Inside!

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Rising interest rates, maintenance costs, property taxes, and the unpredictable housing market have also put a dent in real estate's reputation. People are starting to second-guess whether the potential gains are worth the hassle.

Additionally, the lingering effects of the COVID-19 pandemic changed the game too. With remote work and shifting lifestyles, many are reconsidering their housing needs, and rising crime in U.S. cities is making investors think twice about sinking money into urban real estate. All of this is playing into declining perceptions.

It's important to note, however, that the majority of Americans still continue to name real estate as the best long-term investment, even if perceptions have fallen. Current perceptions about the real estate market are in line with perceptions from 2016 to 2020, before housing prices skyrocketed due to the pandemic.

Meanwhile, gold has experienced a substantial boost.

According to the aforementioned Gallup poll, 26% of Americans now say gold is the best long-term investment. That is a big jump from 2022, surpassing stocks to claim the second position in the hierarchy of preferred investments.

With U.S. stock indexes failing to show significant progress over the past year, the number of Americans who view stocks or mutual funds as the best investment has decreased. Currently, only 18% of respondents consider stocks or mutual funds as the top choice, compared with 24% in 2022. The current preference for stocks falls on the lower end of the range of 17%-27% observed since 2011, highlighting a declining faith in the stock market.

In contrast, the percentage of Americans favoring savings accounts/CDs and bonds as the best investment has seen a slight increase compared with previous years. However, it's important to note that these percentages remain relatively low when compared with other investment options.

To provide some context, Gallup has been tracking Americans' perceptions of the best investment among these five options since 2011 through its annual Economy and Personal Finance poll, which is conducted every April. Prior to that, Gallup posed a different version of the question that did not include gold as an option. The modification in the question was made after gold gained popularity with consumers during the recession of 2007-2009 and the accompanying subprime mortgage crisis.

Real estate's recent fall from grace can be blamed on a few things. The housing market has turned into a roller coaster ride, and prices are going through the roof.

When real estate or stock prices soar, their appeal as the top investment choice increases accordingly. Conversely, when these prices take a nosedive, their popularity dwindles. In such situations, gold often emerges as the favored alternative, benefiting from the diminished confidence in both real estate and stocks.

This pattern is typically observed during periods of economic recession or uncertainty, much like the time surrounding the Great Recession. And this pattern is once more manifesting in today's economic landscape, once again making gold the shining star in the current investment universe.

Until next time,Luke Burgess

Luke's analysis and market research reach hundreds of thousands of investors every day. Through his work with the Outsider Club and Junior Mining Trader, Luke helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor's page.