Is Real Estate a Safe Investment?

real estate investing, how to invest in real estate, real estate investing pros consQ: Real estate is starting to go up, right – shouldn’t I invest in real estate?

A: Gold and silver are currently the best investment and wealth hedge compared to stocks, mutual funds, bonds, and cash. Physical gold and silver you hold can’t be manipulated unless you decide to melt it. It’s stable and safe. But what about real estate?

Many experts, including Robert Schiller and Peter Schiff, predict residential real estate prices will stay low for at least another decade. The price of real estate is highly susceptible to interest rates and government policy.

Recent government programs temporarily spurred residential activity, but tough lending standards and the ending of some of these government programs caused activity to slow. As loan rates move up, the exact opposite will happen to prices. They are sure to fall. The American people are loaded up to their eyeballs in debt and simply cannot afford to pay higher mortgage payments. Since people cannot afford more, their payments must fall – and there’s only two ways for that to happen: lower interest rates or lower house prices. It’s far more likely to be prices that fall than interest rates, which are already historically low.

Along with home prices, commercial property is on the verge of a collapse in many locations. During the go-go 2000s, the easy lending and constant lowering of interest rates pushed development to hysterical levels by speculators. Now there’s a glut of space available and not being filled. More and more people are defaulting on their leases and vacating. The value of commercial buildings is directly related to revenue streams that landlords receive in the form of rent. As those streams dry up, so does the value of the building. Commercial real estate will get pummeled as this correction plays out.