NEW YORK, NY — For many Americans, the old assumption that a home is the best place to build wealth is getting harder to defend. Over the past decade, stocks have outpaced housing by a wide margin, and higher mortgage rates are likely to widen that gap further.
The contrast is especially sharp for younger buyers who have been priced out or delayed by affordability limits. Instead of stretching to buy, some are renting longer and putting money into the stock market, where recent gains have been much stronger than home-price growth.
The latest numbers show how far the two markets have drifted apart. From December 2015 through December 2025, the Case-Shiller home-price index rose 87%, while the S&P 500 climbed 235% before dividends.
Why housing has stayed stuck while stocks kept climbing
The housing market has been unusually quiet since the COVID-era boom ended in 2022. The Federal Reserve began a fast round of interest-rate increases to fight inflation, and the higher borrowing costs helped freeze sales activity.
Mortgage rates are again a major obstacle. The average 30-year fixed mortgage rate is now above 7%, making monthly payments harder to absorb and keeping many would-be buyers on the sidelines.
Stocks, meanwhile, have been pushed higher by the artificial intelligence boom. The S&P 500 has posted a run of double-digit annual gains that has not been seen since the late 1990s, giving investors a much stronger recent record than homeowners have seen in price appreciation alone.
Economists say homeownership mixes living costs and investing
Ray Fisman of Boston University and Michael Luca of Carnegie Mellon University argue that Americans often treat buying a home as if it were only an investment decision. In a Wall Street Journal op-ed, they said the better way to think about it is as two separate choices: where to live and how to invest savings.
They also cautioned that the comparison is not perfectly even. A home is both shelter and an asset, and the U.S. tax code gives owners some advantages that renters do not receive.
Still, they said the financial return on buying can be underwhelming even in periods when home prices rise. Their point is not that homeownership is a bad choice for everyone, but that the investment side of the decision is often overstated.
Leverage can magnify both gains and losses for homeowners
One reason homeowners can feel richer than the raw price data suggests is leverage. Buyers usually finance most of a home’s value and put down only part of the purchase price, so any increase is applied to a smaller amount of equity.
Fisman and Luca used a simple example: a 20% down payment on a house that rises 10% in value would produce a 50% return on the buyer’s initial equity. That kind of math can make modest price gains look dramatic.
The same leverage works in the other direction. If prices fall, the damage can be outsized, especially because a home is a single, illiquid, undiversified asset. That is why financial advisers do not recommend borrowing hundreds of thousands of dollars to buy one stock.
The 2026 gap has widened even more in favor of stocks
The split between the two markets is continuing this year. Latest Case-Shiller data shows home prices up 1.5% nationwide in 2026, while the S&P 500 has gained 13%.
That stock market performance has come despite sharp swings tied to the Iran war and fears of an AI bust. Even with that volatility, equities have still delivered much stronger returns than homes so far this year.
For households weighing where to put their money, the numbers reinforce a broader trend: housing is behaving more like a slow-moving, constrained market, while stocks are still offering faster growth potential, albeit with much more day-to-day risk.
Buyers have more bargaining power as sellers hand out concessions
For people focused more on where they want to live than on investment returns, the current housing market is looking friendlier to buyers than it has in years. Sellers are increasingly offering concessions to close deals.
Redfin said sellers gave concessions in 44.7% of home sales last month, up 2.1 percentage points from a year earlier and the highest August share Redfin has recorded since at least 2020. Those incentives can include mortgage rate buy-downs, help with repairs, or appliances.
In some cases, sellers are offering much more creative sweeteners. Real estate agents in Atlanta and Charlotte have described deals that included a free week-long Airbnb stay or even an all-expenses-paid cruise. Redfin Chief Economist Daryl Fairweather said those kinds of add-ons show how much pressure some sellers are under.
The bigger decision may be lifestyle, not market timing
Fisman and Luca said the real mistake is blending the housing choice and the investment choice into one decision. Where someone wants to live does not have to be the same place they want to concentrate their savings.
That distinction matters because renting and buying each come with trade-offs. Ownership can provide stability and freedom to remodel without asking permission, while renting can mean tighter supply and the risk of having to move.
For Americans trying to make sense of today’s market, the lesson is less about declaring one option always superior and more about recognizing that the investment return on a house is only one part of the calculation. With stocks outperforming and mortgage rates still high, that calculation looks different than it did just a few years ago.
More on what homes, rents and new builds are doing near you, on RHS Commoner.
