As the summer is upon us, volatility will likely be an issue for the stock market as an anticipated rate hike by the Fed will certainly keep investors on their toes.
One option to ride out the volatility could be real estate.
Home Sales are at a nine year high, according to the National Association of Realtors. Pending home sales rose in April for the fourth straight month while sales of new homes came in better than expected.
Lawrence Yun, Chief Economist at the National Association of Realtors® said he “expects a rebound heading into the summer, but the likelihood of meaningful gains will depend on a much-needed boost in inventory and evidence of moderating price growth now that interest rates have started to rise.”
Rising interest rates are one reason why Bank of America (NYSE:BAC) is now advocating higher than normal levels of cash, while adding some gold. In a recent report, the firm said: “The summer months offer a lose-lose proposition for risk assets: either the macro improves and the Fed gets to hike, which will at least temporarily cause volatility.”
Yun agrees that stock prices look lofty and investors who have made capital gains in equities may want to diversify.
"The housing market can handle interest rates well above 4%,” Yun said, “as long as inventory improves to slow price growth and underwriting standards ease to normal levels so that qualified buyers — especially first-time buyers — are able to obtain a mortgage."
And this week, the Mortgage Bankers Association reported the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.02% from 4.07%.
Yun also pointed out that investing in the primary markets has declined compared to the last several years, due to home prices rising faster the renting. “All of the bargains have been bid up, deeply discounted prices are pretty much gone.” But adds that bargains may still be found in secondary market in areas such as Memphis, Kansas City or Indianapolis that are still favorable to the prospective buyer or investor.
While looking to invest in property might be a plan for some, others still see opportunity in the markets.
Keith Fitz-Gerald from Moneymorning.com recently told FOX Business Network he would not advise on getting out of stocks completely. He still thinks we have 5%-8% on the upside.
“Nothing is wrong with taking money off the table and that is what a lot of investors should be doing right now,” he said. “Because as we head into the summer, we have a lot of big profits on the table. You never go broke taking some of the profits off, take some of it off, and buy some of the underperformers.”