New York City real estate has recovered well from the recession, but it still may not be the best investment for your money, experts say.
Since the housing market collapse in November 2011, nearly 500,000 homes were bought and sold in the city, earning a median return of 33%, according to a new report from the real estate listings site StreetEasy.
But the Big Apple is falling behind the national market, as home values across the country rose 45.1% since mid-2012, noted a recent study from StreetEasy’s sister company, Trulia.
Additionally, StreetEasy found that those who bought New York City property in the two years before the crisis and sold during the recovery earned a median annual return of just 1.7%, or a $60,000 cumulative gain on a median-priced home.
Comparatively, the S&P 500 more than doubled since the city’s housing market bottomed out, increasing 125% for an annual return of 13%, making stocks a safer investment for those seeking healthy returns in a 10-year period, Long added.
The trouble with buying and selling homes are the added expenses, including closing costs and property maintenance, he said, whereas stock portfolios require little oversight.
“It’s obviously a lot more liquid - if the stock market’s increasing rapidly, you can sell that day.” However, “the real estate market is not just simply an investment, for a lot of people it’s their home,” he said.
It’s a pied-à-terre.” If you do want to treat housing as an investment opportunity, the best place to put your money is in a real estate investment trust, or REIT, advised Michael Tanney, founder and managing partner of Wanderlust Wealth, a fiduciary financial advisement firm in Manhattan.
Another bonus is that a financial adviser can connect a REIT investment to a tax-deferred retirement account, so your returns are pure profit.
REITs can also be part of a diversified investment portfolio that includes allocations to real estate, fixed income, emerging markets and other assets.