Is Real Estate Your Best Hedge Against Stocks and ETFs?

Stock Market Slump in 2025: Is Real Estate Your Best Hedge Against Dumping Stocks and ETFs?

Author - Scott Conway, Realtor®

As of April 4, 2025, the stock market is flashing red in a gigantic way. We are all feeling the pain one way or another. The S&P 500 is down huge and a stock market correction from its peak is now reality. Tariffs under the Trump administration, sticky inflation at 2.8%, and a cautious Federal Reserve - projecting just two rate cuts this year - have rattled investors. Stock volatility is spiking higher than our own emotional fits, and whispers of a private-sector recession are growing louder, which is yet another punch in the gut for the average investor. But is there a logical reasoned response that can both settle your emotions while also making solid returns? Oh yes, there is.

For San Francisco homeowners and investors, this begs the question: with stocks and ETFs faltering, is real estate a smarter play to protect your wealth?

The Stock Market’s Rough Ride
The numbers don’t lie. After two remarkable years in the stock market we all felt like stock investing geniuses. Seeing a 25%+ S&P 500 return in 2023 and 2024 has been a fun ride. But 2025 doesn't look as promising for stocks or ETFs. Trump’s tariff policy, slapping high levies on major trade partners, has tanked stock markets, wiping out more than $4 trillion in U.S. stock value, per Reuters. Consumer discretionary stocks are lagging behind staples, and even our invincible local tech firms have lost steam in a massive sell-off. The 2025 outlook certainly doesn't look so rosy for stocks and ETFs. For ETF holders, the ride’s getting bumpier - diversification’s no longer the shield it once was as stock-bond correlations weaken. So what is the answer to sustained long-term wealth creation if it's not the stock market?

The Answer Is Right Before Your Very Eyes: Real Estate Just May Be THE Steady Anchor You're Seeking

Enter real estate. Unlike stocks, it’s tangible - you can feel it and touch it and look at it and have pride about it. Indeed, bricks and mortar don’t vanish in a market crash. Historically, it’s a proven hedge, especially in San Francisco. During the 2008 Great Recession, fine wine gained 26% while stocks plummeted 52%, but real estate held its own long-term, with U.S. home prices averaging 4-5% annual growth since. In San Francisco, housing demand persists - 42% of residents rent, and inventory’s tight at less than 60 days on the market. 

Why Real Estate Shines In Times Like These

• Stability: Housing is an essential expense. People pay rent or mortgages even when stocks tank. 
• Inflation Hedge: Rents and property values rise with inflation, unlike stocks that can stall. J.P. Morgan’s 2025 housing outlook sees supply shortages sustaining SF’s market.
• Cash Flow: Multi-unit properties—like a Noe Valley 2-unit at $2.5M—deliver instant income, a buffer against ETF dividend cuts.

The Catch

It’s not all rosy. San Francisco’s cap rates hover at a low 3-4%, lagging other markets like Texas (6-8%) for example. High entry costs and illiquidity mean you’re in for the long haul—unlike ETFs, you can’t sell in a day. Navigating the city’s strict permitting and zoning regulations can also slow your plans. And it can be tough to find income properties that pencil out right away due to high purchase prices and rising renovation costs.

The competition for good income-producing properties is fierce, and the bar for profitability is higher here than in other metros. Buyers often need to act quickly and decisively, with full awareness of local building codes, tenant protections, and rent control laws. Strategic planning and expert local guidance are essential to avoid pitfalls.

But here’s the flip side: San Francisco consistently boasts one of the best rental occupancy rates in the country. Vacancy rates remain low, and the quality of tenants is strong—many are well-employed professionals who pay on time and stay long-term. When you do land a well-positioned multi-unit or single-family property with rental potential, the income can be significant, and the appreciation over time in a supply-constrained city like SF can be game-changing.

The key is to be strategic and patient. With the right guidance, due diligence, and timing, the potential for long-term wealth creation in real estate remains strong.

The Verdict
Stocks and ETFs are reeling, and 2025’s volatility isn’t fading soon. Real estate isn’t a quick fix, but it’s a hedge with legs - stable, inflation-resistant, and income-ready. With 23 years of navigating SF’s market, I’ve seen it weather many storms. Let’s run your numbers - reach out to me to explore if real estate’s your move.

Is it time to shift gears and increase your property portfolio?

Let's chat! ~Scott Conway, 415-707-0363

Disclaimer: This article is for informational purposes only and should not be considered financial or investment advice. Real estate investments carry risks, and market conditions may change. Always consult with a licensed financial advisor or tax professional before making investment decisions.