By Janna Herron, Bankrate.com
The crash in housing prices that walloped the economy over the past decade no longer seems to haunt Americans as it did during the recession. For the first time in three years, real estate was the most popular investment option in a survey that accompanied Bankrate's Financial Security Index.
When asked what kind of investments made the most sense, 27 percent said they'd invest in property if they had a pool of spare cash. CDs and other cash investments, the top answer in Bankrate's 2013 and 2014 surveys, came in second at 23 percent.
Wall Street generated little interest -- only 17 percent said they'd buy stocks -- even though stocks have been a relatively strong investment recently. The Standard & Poor's 500 index jumped 7.7 percent year over year from mid-July.
"We're not seeing the bunker mentality from individual investors to the same extent of the past few years," says Greg McBride, CFA, Bankrate's chief financial analyst. "But the preference for real estate over, say, the stock market, does beg the question of whether or not Americans are again viewing residential housing as a golden ticket."
Gold and other precious metals followed at 14 percent, and bonds, with yields that have hovered near historical lows in the past year, came in last at 5 percent.
Bankrate's survey was based on a national telephone poll conducted between July 9 and 12. It has a margin of error of 3.6 percentage points.
Housing on the riseAmericans are likely encouraged by recent indicators showing the housing market's strength. In May, sales of new homes grew 2.2 percent to the highest level in seven years, and April's figures increased 8.1 percent from March, according to the U.S. Census. Buoyed by demand for single-family homes, existing-home sales also rose 5.1 percent in May, recording a 9.2 percent year-over-year gain, according to the National Association of Realtors.
Home values are also rising. S&P/Case-Shiller's latest measurement of national home prices shows a 4.2 percent year-over-year gain from March to April. Since February 2012, when the index bottomed, prices have increased 26.8 percent.
Investment preferences by demographicsBankrate's FSI survey broke down which groups preferred each investment by varying characteristics. For instance:
"The thing stocks offer that the other investments don't are dividends," Mullins says. "Over time, the compounding and reinvestment of these dividends makes a strong case for stock market investing for any extra money you won't need for 10 years."
And what about real estate, Americans' most preferred investment option? Hank Mulvihill, principal of Mulvihill Asset Management, says that although real estate can be profitable over the long term, it's not as easy to turn into cash as other investments. Instead, he prefers a portfolio of bonds and high-quality, dividend-paying stocks for any money that isn't needed for 10 years. And Mulvihill doesn't think the other investment options in Bankrate's survey are worth considering.
"Cash is not going to become more valuable unless deflation sets in. CDs are bonds issued by banks, and pay insulting rates, so why bother?" he says. "Gold and silver are useless."
Financial comfort shakyDespite the underlying optimism in real estate, Americans' financial security slipped in July, with the FSI hitting its second-lowest reading this year.
When it came to their jobs, 22 percent said they felt "more secure" compared with how they felt a year ago, and 14 percent said they felt "less secure." While still positive, it's a weaker response overall. Last month, 29 percent of those surveyed said they felt "more secure" about their jobs, compared with 9 percent who said they felt "less secure."
They were also concerned about their level of savings. When asked about the money they'd socked away, 29 percent said they were "less comfortable" with their level of savings compared with a year ago. Only 18 percent said they were "more comfortable."
Source: Bank Rate
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