Uncertainty on the world stage has spilled over into the investment arena. War, inflation, gas prices, and political turmoil have weighed on stock and crypto prices. With stimulus money dried up and no longer able to buy stock and crypto prices, the Dow and Bitcoin have taken a beating. Since the beginning of the year, the Dow has been down almost 5%, and Bitcoin is down more than 13%.
As many investors have turned their backs on the volatile public markets, one segment is in more demand than ever; the segment that the ultra-wealthy have always relied on to shield their portfolios from downturns and recessions.
The segment in demand? Affordable Housing.
Why is affordable housing attracting investor attention? Because investors chasing demand are invariably landing on the doorsteps of affordable housing. What can explain the heightened demand for affordable housing?
Here is the abbreviated answer:
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Inflation at 30-year highs.
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High gas prices
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Lagging wages.
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Lack of availability and skyrocketing prices due to homes being snatched up for second-home ownership and the short-term rental boom.
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Construction slowdown.
The combination of pinched pocketbooks and a lack of supply have led to skyrocketing demand for affordable housing that was already in short supply before the current housing boom.
The affordable housing boom is felt all over the country. According to a Pew Research Center survey conducted in October 2021, about half of Americans (49%) say the availability of affordable housing in their local community is a significant problem, up to ten percentage points from early 2018. pewresearch.org.
Why does affordable housing make sense for investors at this time?
Because it’s the perfect antidote to inflation and economic uncertainty, investing in an asset like affordable housing where demand outstrips supply by a large margin means increasing rents will not affect demand, which means cash flow that keeps pace even outpaces inflation.
Affordable housing is always in demand and always a good investment. It’s even more attractive now as an ideal inflation buster and a hedge against a downturn where the loss of income from a job can be compensated by cash flow from passive investments in the segment.
Smart investors always follow demand, and when the going gets tough, demand for certain goods and services never waiver. Demand may even grow.
People will always need the essentials like food, transportation, clothing, and housing, and when incomes get squeezed, consumers will cut luxuries out of their budget. That’s why affordable housing is in more demand than ever and is a wise alternative for any portfolio.
