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Ben Rubenstein on why residential real estate can help hedge against inflation
Key Takeaways
- Real estate can help hedge against inflation because of its intrinsic value, even during inflationary periods.
- Investors need access to alternatives with higher returns to combat inflation, and real estate is a stable and safe alternative to public markets.
- Residential real estate in top-tier markets with high demand and new housing stock, such as in the southern and western US, are a great place to invest for both the short- and long-term.
Transcript
My name is Ben Rubenstein. I am the founder of Setpoint. Setpoint helps Proptech companies and residential fintech companies have access to capital and software to help them grow and scale their businesses.
Real estate is a great hedge for inflation. One of the first signs of inflation was housing prices going up because people were rushing to an asset that they knew everybody needed and will be around, and no matter what happens with inflation, you know, your house retains value because it's something that people want. So I think real estate is a great hedge for that.
I think, in general with what we're seeing in the market is not great returns in publicly traded equities in bonds and others. You know, investors need to have higher returns to combat inflation. A 3% annual return isn't very good when inflation is at 4%. And so, getting access to alternatives is more important than ever. And access to stable, safe alternatives like real estate is more important than ever.
I think in the next 2 to 3 years, we're still going to be in this supply-demand imbalance. It's going to take a number of years for homebuilders to get to the levels that we were at before pre-COVID. And even if you got to those levels, it's going to take a while to shake out to balance a supply and demand imbalance. So I think real estate has a really bright, super short-term future because there's such high demand and you can't solve that supply-demand issue overnight, especially with the challenges we're seeing in homebuilding.
In the long run I think real estate is a very safe asset, especially in top-tier markets where people are moving to. So real estate is a very broad term. I think residential is safer than commercial right now, given that there's a lot in flux with what is the future of work going to look like for people. And I think residential and markets that people continue to move to and are very hot is a great place to to invest. Markets where, you know, this is new housing stock, so you really understand the value of it. Southern western cities are typically that markets where, there's favorable tax laws that people if you can live wherever are going to want to move to in cities that are just consistently people are moving to, you know, will continue to move to. I think a lot of kind of mid-tier cities are exciting right now. Austin was a mid-tier city that a lot of people moving to, or Nashville or Portland, or Boise. These are areas where a lot of people are moving from the coasts because of cost of living, because of taxes, because of lifestyle. And so it's exciting what's happening in those markets.
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