Hate to burst your bubble, but here’s some surprising news from Douglas Elliman Real Estate, the largest real estate brokerage firm in the New York area and the fourth largest residential real estate company nationwide.
It seems that Manhattan homes actually proved to be poor investments during the past decade.
Not only did you earn less from investing in New York real estate than you would have earned by putting your money into a portfolio of stocks and bonds, says Elliman, but you might have actually <gasp> lost money.
Big Apple real estate eked out a miserly return of 1.8% per year, on average, before accounting for closing costs, taxes, maintenance and mortgage interest. Of course, “those costs would have put the typical buyer well into the red,” reports Crain’s New York Business.
Why the sad results?
“People tend to forget that prices dropped in 2009,” said Grant Long, senior economist for StreetEasy, when interviewed by Crain’s. “And while the rate of recovery has been impressive, it hasn’t been outstanding.”
The Takeaway: Not every type of asset performs well all the time. Each has its ups and downs, its strong years and lean years. That’s why it’s important to diversify your investments among different types of assets, like stocks, bonds, real estate and alternatives. That’s the strategy that will produce the most even and consistent returns, year after year, and help give you greater peace of mind.