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

  • Possession the property often is the biggest financial commitment that someone will make, while investment in stocks, as a rule, is a key component of creating wealth.
  • Using data from the Federal Agency for Housing Finance and Yahoo Finance, we compared house prices and share prices over the past few decades.
  • During this time, the shares clearly had a higher profit – but there are several caveats.
  • This is a simplified comparison designed to reflect past work. The best solution for your money depends on your individual circumstances and needs.

Home ownership is one of the biggest financial obligations that most Americans will make, while equity investments are widely viewed as a key component of wealth creation.

We decided to look at how house prices and share prices have evolved over the years.

The use of housing price indices from Federal Agency for Housing Finance and prices for the S & P 500 from Yahoo Finance Returning to 1991, we looked at how the two were compared at different times in the past 27 years, and how house prices in some of the largest US cities came against shares.

In most cases, stocks have surpassed house prices for decades, as the nine-year bull market continues to roar.

It is worth noting that this is a very simplified comparison. Stocks and houses are, of course, two very different types of investments. Ownership of property is related to property taxes and maintenance costs, but also provides a key service to be a place for someone to live that the shares clearly do not. Ownership of shares may include brokerage and other fees.

In addition, stock prices tend to be more volatile over time than house prices. Although the stock market can accumulate a lot of wealth, it is also possible to lose it all. Housing prices tend to increase with time, but as the housing bubble in the mid-2000s and the subsequent decline showed that this increase is far from guaranteed.

Given these reservations, that's how two of the most important financial markets for ordinary Americans have evolved over the past three decades.

Since the beginning of the FHFA series in January 1991, stocks have outperformed house prices.


Since the beginning of the FHFA series in January 1991, stocks have outperformed house prices.
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Since the beginning of the FHFA series in January 1991, stocks have outperformed house prices.

(Business Insider / Andy Kears)

Even when the dot-com collapsed and the stock market crashed due to the financial crisis of the late 2000s, the cumulative increase in the stock market since the early 1990s led to an increase of more than 700%, while housing prices increased by 164% .

But time matters. Since the top of the bubble dot-com in September 2000 leads to a narrow edge of house prices.


But time matters. Since the top of the bubble dot-com in September 2000 leads to a narrow edge of house prices.
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But time matters. Since the top of the bubble dot-com in September 2000 leads to a narrow edge of house prices.

(Business Insider / Andy Kears)

Housing prices rose by about 85%, and stocks rose 79% since September 2000, when the stock market peaked during the technological bubble.

The purchase on the post-technological day of the bubble in the stock market had the opposite effect.


The purchase on the post-technological day of the bubble in the stock market had the opposite effect.
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The purchase on the post-technological day of the bubble in the stock market had the opposite effect.

(Business Insider / Andy Kears)

Housing prices rose by 60%, and stocks rose by 233% since October 2002.

Reserves have also clearly surpassed house prices since the very beginning of the housing bubble.


Reserves have also clearly surpassed house prices since the very beginning of the housing bubble.
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Reserves have also clearly surpassed house prices since the very beginning of the housing bubble.

(Business Insider / Andy Kears)

Stocks rose by 93%, as the housing price index FHFA exceeded the mark in March 2007, and housing took a long time to recover. Housing prices have risen just 17% over the past 11 years, the FHFA index has not fully recovered until 2016.

The shares reached their peak a few months after the housing occurred amid the financial crisis.


The shares reached their peak a few months after the housing occurred amid the financial crisis.
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The shares reached their peak a few months after the housing occurred amid the financial crisis.

(Business Insider / Andy Kears)

Housing prices have increased by 21% since November 2007, and stocks have increased by 76%.

The stock market, as a rule, was in isolation from the post-crisis bottom in 2009.


The stock market, as a rule, was in isolation from the post-crisis bottom in 2009.
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The stock market, as a rule, was in isolation from the post-crisis bottom in 2009.

(Business Insider / Andy Kears)

Stocks rose by 273%, reaching a low in March 2009, and house prices rose 36%.

Housing prices tend to grow from 2011, but stocks are still outperformed.


Housing prices tend to grow from 2011, but stocks are still outperformed.
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Housing prices tend to grow from 2011, but stocks are still outperformed.

(Business Insider / Andy Kears)

House prices rose 48% from May 2011, when the FHFA index reached its post-crisis low, and stocks rose 99%.

The location also matters. That's what house prices in New York looked like compared to the shares from the beginning of the FHFA series.


The location also matters. That's what house prices in New York looked like compared to the shares from the beginning of the FHFA series.
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The location also matters. That's what house prices in New York looked like compared to the shares from the beginning of the FHFA series.

(Business Insider / Andy Kears)

Since January 1991, inventories have increased by almost 700%, and housing prices in the New York-Jersey City-White Plains metropolitan division grew 174%.

Miami was the epicenter of the housing bubble. At the height of the bubble, the rise in house prices since 1991 for a short time surpassed the reserves.


Miami was the epicenter of the housing bubble. At the height of the bubble, the rise in house prices since 1991 for a short time surpassed the reserves.
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Miami was the epicenter of the housing bubble. At the height of the bubble, the rise in house prices since 1991 for a short time surpassed the reserves.

(Business Insider / Andy Kears)

As of the second quarter of 2018, house prices in the metropolitan division of Miami-Miami Beach-Kendall increased by 297% from the 1st quarter of 1991.

Denver had the largest overall increase in house prices since 1991 among the 20 largest metro areas and metro stations tracked by the FHFA.


Denver had the largest overall increase in house prices since 1991 among the 20 largest metro areas and metro stations tracked by the FHFA.
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Denver had the largest overall increase in house prices since 1991 among the 20 largest metro areas and metro stations tracked by the FHFA.

(Business Insider / Andy Kears)

Housing prices in the metropolitan area of ​​Denver-Aurora-Lakewood increased by 413% from the first quarter of 1991, still below the nearly 700-percent increase in stock prices.

In most time and metro intervals, stock prices over the past two decades have surpassed home prices in the US.


In most time and metro intervals, stock prices over the past two decades have surpassed home prices in the US.
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In most time and metro intervals, stock prices over the past two decades have surpassed home prices in the US.

(Reuters / Carlo Allegri)

Figures are just one thing to consider, and it is important to remember that past performance can not predict the future.

This does not mean that stocks are always the best investment for everyone at any time or that buying a house is a wrong choice. Everyone has different financial and housing needs, while several factors make such decisions.

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