Housing Market & Economy, Industry Trends, Investing Strategies

Why Real Estate Still Makes Sense in Today’s Economy

Author: Erica Hackmyer

Date Posted: Jun 3, 2025

investor on computer researching economy housing market

Economic uncertainty is back in the headlines. With new tariffs, global tensions, stubborn inflation and talk of a slowdown, it’s no surprise some real estate investors are getting cold feet.

You might be asking:

“Should I really be investing in real estate right now when the overall economy feels shaky?”

It’s a fair question — and one we’re hearing more often in 2025. At LendingOne we believe the answer isn’t a hard yes or no. It’s about perspective, planning and understanding why real estate behaves differently than many other asset classes during economic shifts.

Here’s why smart investors aren’t backing down — and how they’re adjusting to stay ahead.

The Big Picture: Slower, Not Stopped

Let’s look at the numbers. The US economy is growing — just not as fast.

According to the Bureau of Economic Analysis (BEA) Q1 2025 GDP was 2.2%, below expectations but still good. Unemployment is at 4.0% and consumer spending is holding even with tighter budgets.

But investor sentiment is being spooked by:

  • New tariffs on Chinese goods which have increased costs for builders and developers.
  • Concerns about a consumer slowdown in Q3.
  • Global instability which adds uncertainty to supply chains and equity markets.

But major real estate markets — residential and small to mid-size commercial — are stable.

Why Real Estate Performs Differently During Economic Volatility

Real estate doesn’t react to every economic twitch like equities or crypto.

Here’s why:

Real Estate is a Hard Asset

Real estate is physical. It provides shelter, utility and income — all things people need regardless of market cycles. In uncertain times many investors rotate into hard assets to hedge against currency shifts, inflation or market volatility.

Real Estate Gives You Control 

You can’t control the Fed’s interest rates. But as a real estate investor you can:

  • Set your own rents
  • Renovate to increase value
  • Refinance when rates drop

That kind of control is priceless in uncertain times.

Real Estate Cash Flows

Dividend stocks pay out a few times a year. Crypto doesn’t cash flow at all. But rental properties? They cash flow every month — and often increase with inflation.

According to Zillow, US median rent prices are up 3.2% year over year as of April 2025 — slower than the pandemic peak but still growing. In most areas, rents are holding strong even as home prices level off.

What Investors Are Worried About — And How to Respond

Objection 1: “Tariffs are increasing construction and material costs.”

Reality: That’s true — especially for new builds. But this also tightens future inventory which can increase the value of existing properties. Investors focused on value-add renovations or turnkey rentals may actually benefit.

Pro Tip: If you’re building or renovating, lock in pricing with contractors and suppliers early. Also, look at areas where new supply is already constrained — these tend to hold value better.

Objection 2: “The economy will go into recession.”

Reality: A slowdown isn’t a crash. And historically real estate has often remained resilient — or even appreciated — during mild recessions especially in undersupplied areas.

Did You Know? During the 2001 recession US home prices still rose 6.6% nationally

Even during the 2020 pandemic prices surged as demand outpaced supply. Today housing supply is still below long term averages so even a small drop in demand won’t collapse the market.

Objection 3: “My other investments are down — I don’t want to overextend.”

Reality: Diversifying into real estate may actually help stabilize your overall portfolio. The correlation between stock market returns and housing is low — they don’t tend to move together. When stocks zig, real estate may zag.

Consider: Short- or mid-term rental properties in cash flowing markets. These can produce immediate income while allowing for appreciation over time.

What Smart Investors Are Doing in 2025

At LendingOne we’re seeing three key behaviors from experienced investors in this economic climate:

They’re Stress Testing Their Deals

Investors are modeling conservative rent assumptions, factoring in possible price drops, and underwriting to higher interest rates — and still moving forward when the numbers work.

They’re Building Liquidity

Having reserves doesn’t mean you’re scared. It means you’re ready. The investors who move fastest when a deal appears are the ones who have access to capital, flexible terms and pre-approved financing.

They’re Playing the Long Game

Economic cycles come and go. The investors who succeed think in 3-, 5- or 10-year horizons. They know short term turbulence doesn’t stop long term equity growth, rental demand or portfolio expansion.

Practical Advice for Investors Feeling Economic Pressure

Here are a few things you can do today:

  • Run deal analysis at higher rates and lower rents. If it still works — it’s probably a good move.
  • Focus on local economic data, not just national headlines. Some markets are still growing jobs and population even if national sentiment is negative.
  • Explore bridge financing or shorter loan terms. This can help you stay flexible as the macro picture evolves.
  • Work with lenders who know how to navigate cycles. (That’s us.)

Final Thought: Chaos Doesn’t Cancel Opportunity — It Reshapes It

Every investor remembers moments when fear ruled the market — and when those who acted early came out ahead.

Yes, the economy feels uncertain. But when you zoom in on the data, fundamentals and trends in housing the story becomes clearer:

Real estate is one of the most controllable, durable and income generating assets you can own — even when the economy feels shaky.

If you’re feeling uncertain but want to keep looking at opportunities let’s talk.

Talk to a LendingOne Advisor about structuring a financing plan that works in this environment. Whether you’re buying your first deal or scaling your portfolio we’re here to help you invest with clarity — not fear.