The economy, real estate and Pacaso: Your questions, answered

Published Date: August 30, 2022

A bay-fronted city skyline at dusk
We are frequently asked for our perspective on how turmoil in the economy will affect real estate and Pacaso. Of course, nobody can predict the future, but we can look at the current market and past economic cycles for guidance, and what we see gives us confidence in the stability of the real estate market.

Would I be better off purchasing real estate or investing in the stock market if a recession is looming?

A line graph compares the real estate market to the stock market and how stable are each, indicating that the real estate market is generally more stable.
Our team of real estate and economics experts love this question and, while we can’t give investment advice, historical data shows that, since 1980, real estate has been more stable than typical stock market indexes during periods of economic recession or uncertainty.¹
A graph comparing home price growth relative to GDP and the stock market sine 1980.

What are you seeing in the real estate market today?

This is not 2008.² Currently, real estate remains robust as demand, tight inventory and supply chain constraints on labor and raw materials continue to define the market.³ Even rising interest rates have been slow to have an impact.

Will rising interest rates impact sales?

Reports suggest a return to more normalized transaction levels and timing due to a combination of rising interest rates and low inventory.⁴ Should that occur, we believe Pacaso offers a unique solution to customers because interest rates impact co-ownership less than whole home ownership, as the purchase price is proportionally smaller. Combined with lower overall costs, co-ownership is the more financially responsible purchase than a traditional second home. Also, Pacaso allows customers to avoid fierce competition over low inventory.

What if I want to purchase real estate partly as a hedge against instability in the wider economy?

Five icons illustrate some hurdles to buying a second home, including low inventory, property management being required, and furnishing costs — all of which are offset by Pacaso’s co-ownership model.
Like gold or treasury securities, real estate is used by many as a hedge against inflation and market volatility, but purchasing a traditional second home now is difficult due to low inventory. It is a time-consuming process, involving multiple offers, closing and furnishing that could take months to complete and time after to manage the property. Pacaso provides a more efficient alternative. With Pacaso, customers can close on a share in a matter of days and Pacaso takes all the hassle out of owning after that. Most importantly, you will co-own and have access to a beautiful, luxury home in a destination community.

What if I buy now and need to sell during this economic cycle?

Again, we can’t predict the future, but history shows that the real estate market will remain stable. Should you want to sell in this economic cycle, Pacaso offers a seamless resale process. Pacaso units have resold, on average, in less than 12 days for a 12% gain. Additionally, 25% of resales are purchased by other owners of the same Pacaso who wanted to increase their ownership.
1. For this analysis we looked at numerous publicly available datasets covering various economic signals — including GDP growth, housing price data and stock market data — to study the effect economic cycles have on different asset classes in the United States. We looked at year-over-year returns for the following indexes: US Home Price Index, US GDP Growth, S&P 500 Returns, Dow Jones Returns and Top-Tier Real Estate Home Value Index. 2. Zillow Research on June 7, 2022. (2022, June 7). Housing market hot but not a bubble, economists say. Zillow Research. Retrieved June 17, 2022, from https://www.zillow.com/research/zhpe-q2-2022-not-a-bubble-31093/ 3. Speianu, S., & Hale, D. (2022, June 1). May 2022 housing market trends report, Realtor.com Economic Research. Retrieved June 16, 2022, from https://www.realtor.com/research/may-2022-data/4. Nicole Bachaud on May. 19, 2022. (2022, June 1). The housing market is as competitive as ever despite soaring costs (April 2022 market report). Zillow Research. Retrieved June 17, 2022, from https://www.zillow.com/research/april-2022-market-report-31040/

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