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Is buying a house a better investment than the stock market? We did the math, and the answer is clear

September 14,2018 04:15

Owning real estate is often the biggest financial commitment someone will make, while investing in stocks is generally a key component of building wealth. Using data from the Federal Housing Finance Agency and Yahoo Finance, we compared housing ...and more »



Owning real estate is often the biggest financial commitment someone will make, while investing in stocks is generally a key component of building wealth.
Using data from the Federal Housing Finance Agency and Yahoo Finance, we compared housing prices and stock prices over the past couple of decades.
In that time, stocks have clearly had higher returns — but there are a few caveats.
This is a simplified comparison meant to reflect on past performance. The best decision for your money depends on your individual circumstances and needs.

Home ownership is one of the biggest financial commitments most Americans will make, while investing in stocks is widely seen as a key component of building wealth.
We decided to take a look at how housing prices and stock prices have fared over the years.
Using house-price indexes from the Federal Housing Finance Agency and prices for the S&P 500 from Yahoo Finance going back to 1991, we looked at how the two compared at various times in the past 27 years, as well as how housing prices in some of the biggest cities in the US have fared against stocks.
In most cases, stocks have outperformed housing prices over the decades, as a nine-year bull market continues to roar.
It's worth noting that this is a very simplified comparison. Stocks and houses are, of course, two very different types of investments. Home ownership comes with property taxes and upkeep costs, but also provides the key service of being a place for someone to live that stocks clearly do not. Stock ownership can involve brokerage and other fees.
Further, stock prices tend to be more volatile over time than housing prices. While it is possible to accrue great riches in the stock market, it's also quite possible to lose it all. Housing prices have tended to rise more steadily over time, but as the mid-2000s housing bubble and subsequent bust showed, that increase is far from guaranteed.
Given those caveats, here's how two of the most important financial markets for ordinary Americans have evolved over the past three decades.

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Stocks reached their peak a few months after housing did amid the financial crisis.

Business Insider/Andy Kiersz
Housing prices are up 21% since November 2007, while stocks are up 76%.

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The stock market has generally been on a tear since the post-crisis bottom in 2009.

Business Insider/Andy Kiersz
Stocks are up 273% since hitting a low in March 2009, while housing prices are up 36%.

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Location also matters. Here's how New York City housing prices have fared compared with stocks since the start of the FHFA series.

Business Insider/Andy Kiersz
Stocks are up nearly 700% since January 1991, while housing prices in the New York-Jersey City-White Plains metropolitan division are up 174%.

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Miami was an epicenter of the housing bubble. At the bubble's height, housing price growth since 1991 briefly surpassed stocks.

Business Insider/Andy Kiersz
As of the second quarter of 2018, housing prices in the Miami-Miami Beach-Kendall metropolitan division are up 297% since Q1 1991.

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