by Adam Stauffer, CFA, Chief Investment Officer at Offshore Investment Advisor
US home equity peaked in 2005 at $13.1 trillion when it accounted for over 22% of households’ net worth, according to the Federal Reserve. Now five years later it stands at $7 trillion and accounts for only 13%. The magnitude of this fall and its unprecedented global reach have left many investors breathless—questioning the role that real estate plays in maximizing long-term wealth.
Historically, real estate has been an excellent way for individuals to not only save but to build wealth. Despite this, many wealth managers do not include it in their asset allocation calculations. In fact, there is a relative dearth of research on how home equity fits into an individual’s overall portfolio. In my opinion, this is a mistake. Not only can real estate offer great diversification relative to other assets, such as stocks and bonds, but it also forces investors into a regimented savings plan.
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