6 Ways the Wealthy Are Benefiting From the Real Estate Market in 2024
The U.S. housing market isn’t the best right now — nor has it been for the past few years. In June 2024, the average sales price of a home was $487,200, per the U.S. Census Bureau. Inventory is still down in many parts of the country, and mortgage interest rates are higher than they’ve been in years — 6.73% on a 30-year fixed-rate mortgage, per the Fed.
The housing market has already priced out the average person looking to buy a home. First-time buyers and those who don’t have substantial wealth or assets to their name are putting off purchasing property — largely due to necessity.
They Seek Opportunities for Themselves
For the wealthy, it’s not just about buying property for the sake of it. It’s about seeking opportunity where others don’t see it — or can’t afford it.
“The wealthy are acquiring real estate in key markets that not only align with their lifestyles and passions, but markets where there is opportunity — whether it be acquiring a trophy asset, or there are motivated sellers which presents opportunity to acquire a property at a good trading price,” said Nikki Beauchamp, NYRS, an associate broker at Sotheby’s International Realty in New York City.
Take luxury homes as an example. These are properties that go for, on average, $1 million or above. According to the National Association of Realtors, these were the only homes to actually increase in sales in June of this year — up 4% from the year prior. All other properties saw a drop in sales during this period.
At the same time, all-cash offers have increased recently. According to Redfin, 46% of homebuyers used cash to buy property in the first quarter of 2024. This is feasible for the wealthy, not so much for the average buyer.
But They Also Seek Opportunities for Generational Wealth
Building true wealth can take decades or even generations. For those who are already flush with cash, one of the best ways to keep that money is to create generational wealth through real estate.
“Many [wealthy individuals] are choosing to help their potential future heirs today, with co-purchasing scenarios as well,” Beauchamp said. “I am seeing this today in my own personal brokerage practice with individuals and family offices seeking opportunities (also important to note that there are projections of substantial wealth transfers underway intra- and inter-generationally).”
Late last year, the Visual Capitalist created a handy graphic identifying the spread of wealth — $156 trillion — across the U.S. by generation. A whopping $41.7 trillion of this total wealth was in real estate. Unsurprisingly, baby boomers held the majority of the wealth as well, followed by Generation X.
They Invest In Self-Storage
For the wealthy, it’s not only about building wealth through residential properties. In fact, many affluent investors prioritize commercial real estate, as they can use it to build passive income. Others go for alternative options that also have a long-term advantage.
One such option is self-storage.
“Self-storage is a burgeoning asset class that provides tremendous benefits to investors,” said Michael Margarella of Next Play Investments. “Self-storage is widely considered ‘recession-resistant’ because it is not drastically impacted by worsening economic conditions. In fact, self-storage occupancy generally increases as folks move, downsize or are displaced.”
Margarella added that self-storage units are also “inflation-resistant.” This is because storage owners can increase rents to match inflation.
“This is unique to the storage industry because most leases are month-to-month, allowing owners to closely track inflation,” he said.
And They Invest In Rental Units
Rental properties are another lucrative investment for the wealthy — and it has to be for them since the typical buyer can’t generally afford these.
“Right now, wealthy investors know that a lot of people are choosing to rent rather than buy (largely for financial reasons), so traditional real estate investing in terms of renting properties out is proving to be incredibly financially fruitful,” said Seamus Nally, CEO of TurboTenant.
Healthcare-Backed Real Estate Is Another Big One
Another lesser-known but still lucrative real estate investment is healthcare-based properties.
“This sector is particularly attractive due to its recession-resistant nature and the growing demand driven by an aging population,” said Austin Hair, managing partner of Leaders Real Estate and host of the “Commercial Real Estate Secrets” podcast. “Healthcare facilities, such as medical offices and senior living centers, offer stable returns and long-term leases with creditworthy tenants.”
The Wealthy Also Invest In ‘Tokenization’
A newer addition to real estate investing that allows the wealthy to benefit from the current market comes in the form of advancements in tech — specifically blockchain.
“Tokenization of real estate assets allows investors to purchase shares in properties, democratizing access and providing liquidity that traditional real estate investments lack,” Hair said. This lets individual investors diversify their portfolios and maximize their returns.