Study: Fair Sailing Ahead for Real Estate IRAs

Real Estate IRAs have had a very nice run over the past several years. And 2018 looks like another positive year for real estate overall. The Urban Land Institute’s 2018 Real Estate Trends Report predicts a smooth year of appreciation for real estate assets in or out of Real Estate IRAs.

Some of the highlights from the report:

A “sudden drop” in the housing market is unlikely. Real estate utilization rates are going up as millennial’s begin to gain traction in the housing market.

A “soft landing” is more likely to cap the current expansionary cycle than a real estate recession. The economic cycle has surely not been repealed, but there are no major economic trends that currently threaten real estate as an asset class in the United States. Part of the reason for the soft landing prediction is the modest to slow pace of the recovery. Real estate more or less kept pace with overall economic expansion, which means real estate prices did not get so far ahead of fundamentals and price supports as they did during the sunup to the 2008 mortgage crisis.  We are not seeing the late-cycle optimism that characterizes asset bubbles – at least in real estate.

Real estate is also getting a boost from the strong economy as well as a booming stock market. Granted, the stock market could take a nasty correction tomorrow – one important reason why we recommend using Self-Directed IRAs to help diversify your portfolio away from stocks. But the strong job market looks more permanent, as companies do not like to to through the expense of hiring people whom they are not confident will stay on board for a good while.

The report also identified a stubborn shortage of housing supply that will continue to boost real estate for some time to come. Even high real estate appreciation and price levels is not leading directly to new supply in some Real Estate IRA markets. The study identified these markets as experiencing high price appreciation but very low supply expansion:

  • Washington, D.C.
  • Brooklyn
  • Orange County
  • San Francisco
  • San Jose
  • Miami
  • Fort Lauderdale
  • Seattle
  • Portland, OR
  • Inland Empire, CA
  • San Francisco


The Institute also recommends that investors focus more on rental income than price appreciation at this point in the cycle. Many markets are comparatively mature, as investors have bid up prices to match expected rental revenues. Some areas may be fully priced. But as long as employment remains strong, rental income should be steady and reliable, for the most part. Concentrate on cash flow and careful asset management.

One opportunity for a Real Estate IRA investment is senior housing. As of 2016, there were 49.4 million U.S. residents aged 65 or older, or about 15 percent of total population. By 2030, that figure is projected to grow to 75.5 million, or 21 percent of the population, according to the U.S. Census Bureau.

Yes, an individual landlord can devote some or all of a real estate portfolio to homes or condominiums that may have appeal for older Americans. Another way to play it would be to invest in private equity or private debt placements or REITs that focus on senior housing development.