Stocks versus housing – who wins?
Comparing gains in median home against returns on a median stock portfolio, Redfin and FutureAdvisor found stocks offered a higher return between January 2010 and May 2016.
In studying 24 major U.S. metro areas, they found that a median financial portfolio earned between 63 and 70 percent since 2010, a higher rate of return than the housing market in all but four metros.
Way to go, California!
Redfin points out the exceptions are:
- Miami (where home prices rose 73.3 percent)
- San Jose (home prices are up 74.7 percent)
- San Francisco (up 72.7 percent)
- Oakland (up 67.6 percent)
Other areas had “a more steady recovery,” including Philadelphia (home prices rose 11 percent) and Baltimore (up 11.4 percent). Residents in these areas would have earned more by investing in stocks than the housing market. Redfin is quick to point out in their statement: “However, a great deal of value can be derived from a home purchase beyond its price appreciation.”
Pros, cons to any investment
“There are pros and cons to any investment, but real estate is unique in that it offers the advantage of forced savings through the monthly mortgage payment,” said Redfin chief economist Nela Richardson. “The fact that homeowners build an increasing share of equity just by paying their mortgages every month enforces a savings discipline on consumers that is absent in stocks. For this reason, real estate historically has served as the primary engine of wealth creation, particularly for the middle class.”
The study also found that in most cities, multi-family buildings enjoyed higher appreciation than single-family homes, and the best time to buy was in December 2010 as home prices have appreciated 46 percent since then.
December is the best month!
Our favorite snippet from the study? Homes purchased in December have appreciated the most since 2010, so we’re approaching the best month to buy.
#marketvmarket
