When real estate values fall, what asset type goes up?

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Chris SeveneyBusiness Member
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
4y

@Victor Steffen

Check out a correlation chart like one attached and find what is negatively correlated. Based on attached cash and currencies

https://www.guggenheiminvestments.com/mutual-funds/resources/interactive-tools/asset-class-correlation-map

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Victor Steffen:

    In other words, what asset type would you buy to hedge against real estate? 


     severely distressed real estate is a good play. 

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  • Dwayne Poster
    Investor · Van Isle · Member since 2021 · 455 posts · 226 votes
    4y

    Interest rates and homes prices are typically related. You either buy with financing, or you sell with financing, depending on the economic conditions. 

    0Reply
  • Chris SeveneyBusiness Member
    Moderator
    Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
    4y

    @Victor Steffen

    Check out a correlation chart like one attached and find what is negatively correlated. Based on attached cash and currencies

    https://www.guggenheiminvestments.com/mutual-funds/resources/interactive-tools/asset-class-correlation-map

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  • Bruce D. Kowal
    Metro NY + New Bedford · Member since 2022 · 294 posts · 216 votes
    4y

    Self-storage companies do well.

    2Reply
  • Victor SteffenBusiness Member
    OP
    Investor · Austin, TX · Member since 2017 · 352 posts · 374 votes
    4y

    @Chris Seveney Very helpful and interesting! Thank you for the share

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  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    4y
    Quote from @Chris Seveney:

    @Victor Steffen

    Check out a correlation chart like one attached and find what is negatively correlated. Based on attached cash and currencies

    https://www.guggenheiminvestments.com/mutual-funds/resources/interactive-tools/asset-class-correlation-map


     short term high yield trust deeds are a very good alternative in this market they are already priced for the risk of retreating values with the equity protection component.  Very nice play setter and a very good addition to a well rounded portfolio. 

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  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    When Real Estate prices drop, that is the time to buy....forget other 'asset classes'.

    5Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y

    Depends on the root cause.

    Regardless real estate down or not, but very basic theory is like this.

    -If Inflation is rising due to price of energy, then you buy commodities.

    -If SFR house goes down, but it started to create "v" signal from "Case-Shiller" Index, it's time to buy all the house in the neighborhood. What I found, the SFR market in San Francisco is always the fastest to make the quick turnout compare to other market.
    That case-shiller index is like Torah for RE investor haha...

    - If you are into syndication, the little bit safer side is investing into MHP.

    0Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y
    Quote from @Chris Seveney:

    @Victor Steffen

    Check out a correlation chart like one attached and find what is negatively correlated. Based on attached cash and currencies

    https://www.guggenheiminvestments.com/mutual-funds/resources/interactive-tools/asset-class-correlation-map

    There're other asset class as well that has zero correlation to Index and real estate.
    Those are like litigation financing or music royalty.

    There're few interval funds for Accr. Invest. that the NAV keeps growing regardless with actual return after all the fees are still 6.5% pa.

    0Reply
  • Chris John
    Member since 2020 · 671 posts · 937 votes
    4y

    @Victor Steffen

    I think @Bruce Woodruff brings up a really good point.  However, until we see an actual drop, my brother said he's been doing well in commodities for the past half year or so.  I don't know if he's short, long, in corn or soy though.  I just know he's happy!  haha.

    2Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    4y

    @Victor Steffen
    Just curious... do you have cash sitting around you're looking to invest as a hedge?  Or did you just want to see what the community says?

    If real estate values fall... I plan to buy more real estate.

    5Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y
    Quote from @Nicholas L.:

    @Victor Steffen
    Just curious... do you have cash sitting around you're looking to invest as a hedge?  Or did you just want to see what the community says?

    If real estate values fall... I plan to buy more real estate.


    actually now is very good time to buy public REIT as their market price is less than NAV/book val sometimes and price just dropped because of the market. Just needs to have a lot more filters though as one is safer compare to others,etc.

    If interest rate down again then buy BDC,MREIT, all FNGU/tech stock haha lol

    1Reply
  • Carlos Ptriawan
    Member since 2019 · 7k+ posts · 4k+ votes
    4y
    Quote from @Victor Steffen:

    In other words, what asset type would you buy to hedge against real estate? 


    VNQ put options.
    As VNQ is an index that purchases multiple REITs, it could be the easiest way to hedge against real estate declines in value. 10% holding is industrial sector.

    0Reply
  • Matt Bishop
    Rental Property Investor · Dallas, TX · Member since 2020 · 161 posts · 88 votes
    4y

    @Victor Steffen,

    Now this is a good question for investors. Much better than questions about how to self manage the daily operations our properties.

    If real estate prices go down, your dollar is stronger and it's a good time to shop for more real estate. Price dips are temporary and having the ability to hang in there will make you rich. Long term, real estate is, i believe, the best way to riches. Never sell real estate if prices are down. They're going to rebound to even higher highs.

    0Reply
  • Matt Bishop
    Rental Property Investor · Dallas, TX · Member since 2020 · 161 posts · 88 votes
    4y

    @Jay Hinrichs, I believe just about any real estate is a good plan. Gosh - darnit, I love it!

    0Reply
  • Mike Dymski
    Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
    4y

    short REITs

    1Reply
  • Kurt S.
    Investor · Chicago, IL · Member since 2016 · 20 posts · 15 votes
    4y

    Hard to make a real general case. However, in this market, stocks are selling 20+% off their highs. Depending on your investing horizon this may be attractive right now to hold for the long-term. In inflationary environments like we're in, typically commodities are not a bad bet. I bought some I Bonds in March that are basically a bet on inflation going up. 

    0Reply
  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
    4y

    As a long term investor I'd probably buy shares in Coleman tents, because if real estate goes down enough that you need to find an asset to hedge against it means there's probably a lot of people living in tents :)

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  • Eric Bilderback
    Real Estate Agent · Sisters, OR · Member since 2014 · 1k+ posts · 1k+ votes
    4y

    If interest rates do get a lot higher which I don’t believe they will, I would buy real estate and pay off the debt faster.  That’s what many people who invested in the 80s did.


    in a rising interest rate environment though I am not aware of any “hiding places”.  If everything loses purchasing power the dollar may be your best bet.  I personally however have problem with assets that don’t create an income stream.  I am a real estate guy!  Lol

    1Reply
  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    4y

    I bought I -Bonds paying 9.65%, then hold a BIG chunk of cash in stock account only because of my age if younger I would dollar cost average in. Hold on to the rentals collect and invest yea I did buy a small position of Gold.

    1Reply
  • George M.
    Rental Property Investor · Albany, NY · Member since 2018 · 55 posts · 65 votes
    4y

    @Billy Smith

    I bonds are a solid pickup right now for small amounts (10k max purchase per person per year). Boring is exciting.

    1Reply
  • Steve Vaughan
    Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    4y
    Quote from @JD Martin:

    As a long term investor I'd probably buy shares in Coleman tents, because if real estate goes down enough that you need to find an asset to hedge against it means there's probably a lot of people living in tents :)

     So I come back for my monthly check-in and tents are on the table😎   Dang...

    In a rising rate but falling price environment, be the bank when you sell.  You have your chair already when the music stops so you can buy lots of tents first... 

    2Reply
  • Justin Winn
    Real Estate Agent · Mountain View, CA · Member since 2016 · 70 posts · 59 votes
    4y

    Many have already said it depends… so the two ways real estate goes down in the future as I see it is if deflation occurs (not likely) and the dollar starts buying more for its value. In this case I don’t see a reason to prioritize one asset class over another. Although I’m sure there would be a lot of advertising for Gold, silver and other precious metals.

    The second thing would be demand, but if you’re investing in states and cities with population growth then you’re ok. If your particular market has had a large exodus of people or businesses for some reason, then it’s time to move that money elsewhere.

    I personally think diversification across asset classes and within RE specifically diversification across strategies and markets is key to protecting your investments.

    Great question, best of luck in your diversification ambitions.

    0Reply
  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    I buy real estate in all cases 

    0Reply
  • Scott TrenchPro Member
    Rental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
    4y
    Quote from @Chris Seveney:

    @Victor Steffen

    Check out a correlation chart like one attached and find what is negatively correlated. Based on attached cash and currencies

    https://www.guggenheiminvestments.com/mutual-funds/resources/interactive-tools/asset-class-correlation-map

    This is a great link! I was just going to write something about how all the asset classes seem to move together these days, but this is more effective. This reinforces the idea of having substantial cash reserves as a real estate investor. The cash reserves are part of the investment, and hedge perfectly against the risks of rising interest rates and deflation, the major threats to a real estate investor's net worth. 
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