Realty Shares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. According to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment. With such a strong preference for real estate, it is important to understand why millennials are interested and how they may invest in the future.
Why is it important? Well, last year, millennials became the largest generation of Americans. According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers. As the largest age group in America, millennials will have the greatest ability to shift the market as their net worth builds, rendering it key to take note of millennial views on real estate and investment opportunities overall.
Millennials are skeptical of the stock market
Survey respondents were asked to choose between stocks, real estate, commodities, bonds, and cash equivalents such as oil, gold and cotton as the best-performing investment since 2000. Overall, 40 percent reported uncertainty around which asset class performed best, and 25 percent believed the stock market was the best investment.
In reality, real estate outperformed the stock market during that time frame. Millennials got it right: over the 16-year period from 2000 to 2016, the S&P 500 yielded a 5.43 percent annual total return compared to 10.71 percent in real estate. And while the S&P has had a slight advantage more recently, both markets have recovered well since the Great Recession, with the S&P and real estate at 12.65 and 11.37 percent, respectively (range from Dec. 31, 2010 to Dec 30, 2016).
In the RealtyShares survey results, 20 percent of millennials indicated they believe real estate has performed the best since 2000. In fact, millennials were the age group with the largest percentage with that belief. The next highest group to believe real estate outperformed the stock market since 2000 is comprised primarily of Generation X (ages 35 to 44), 16 percent of whom chose real estate as the top performer.