The housing sector soared to new heights in 2023, with median home prices hitting an all-time high of $389,800. Despite rising mortgage rates, housing demand remained robust, making real estate one of the best-performing alternative investment markets.
In 2024, experts predict this trend will continue as mortgage rates are expected to decline, with national house prices forecasted to rise by 2.9%.
Investors looking to diversify their portfolios often turn to real estate investment trusts (REITs) or private real estate. REITs, traded on stock exchanges, offer liquidity and diversification, distributing taxable income to shareholders. In the U.S., publicly traded REITs own $2.5 trillion in assets.
On the other hand, private market real estate funds are not traded on exchanges and provide investors with control over property selection and management. Crowdfunding platforms are making private equity real estate more accessible to retail investors, offering higher returns with added risks.
While private market real estate has the potential for substantial returns, it comes with liquidity risks due to illiquidity and lock-up periods. However, successful property management and value enhancement strategies can lead to significant gains, making it a compelling option for investors seeking to grow their wealth.
In a constantly evolving financial landscape, understanding the differences between REITs and private market real estate can help investors make informed decisions to maximize their returns.
