Business Insider 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.
Since the start of the FHFA series in January 1991, stocks have dramatically outperformed housing prices.
Even with the dot-com crash and the stock-market crash in the wake of the financial crisis of the late 2000s, the cumulative gains in the stock market since the beginning of the 1990s have resulted in a gain of over 700%, while housing prices have increased 164% in that time.
But timing matters. Starting at the top of the dot-com bubble in September 2000 leads to a narrow edge for housing prices.
Housing prices are up about 85% while stocks are up 79% since September 2000, when the stock market peaked during the tech bubble.
Stocks have also understandably outperformed house prices since the top of the housing bubble.
Stocks are up 93% since the FHFA house-price index topped out in March 2007, while housing took a long time to recover. Housing prices are up just 17% in the past 11 years, with the FHFA index not fully recovering until 2016.
Stocks reached their peak a few months after housing did amid the financial crisis.
Housing prices are up 21% since November 2007, while stocks are up 76%.