There’s always been a question about which is the better investment long term, real estate or stocks? Opinions vary, but there is one thing for sure: You can’t reside in your stock portfolio. Another thing for sure is if you ask real estate pros for opinions, you pretty much get the same answer.
Those willing to accept a fair amount of risk will likely do better in the stock market over time. The 10-year annual S&P 500 performance breakdown from 2016 to 2025 wins hands down, or palms up if collecting profits. Within that decade were four gains in the mid-20% range, with only two negative return years. Of course, what happened in the past has no bearing on the future.
Real estate properties have historically increased in value over time. In 1970, the average price of an American house was $27,000. A comparable investment property now would be worth approximately $500,000, according to Federal Reserve Economic Data. That appreciation could represent a meaningful source of retirement funding if the property were eventually sold.
According to the Zillow Home Value Index, the average United States home value is $366,157, up 1.2% over the past year, and homes go to pending in around 27 days. Stock returns can be volatile due to several factors. Economic events such as recessions, interest-rate fluctuations and geopolitical tensions can significantly impact stock prices. Few would probably be shocked if the continuing war with Iran cratered the stock market at some point.
Stocks now account for more than a 30% share of total U.S. household assets, versus real estate at closer to 25%, according to TD Securities. That wasn’t always so. In the mid-2000s, real estate represented more than 30% of total household wealth, while stocks were around 15%.
So what would you as a real estate pro tell clients if the stocks vs. real estate subject arose?
“Your first investment property is the home you live in,” asserts Pam Rosser Thistle, with Berkshire Hathaway HomeServices Fox & Roach, Realtors® in Philadelphia, while admitting the stock market numbers win right now. “Over time, it appreciates. And you enjoy it. Win, win! Right now I am bullish on happiness, and owning a home is part of that. Appreciation is not like it was during COVID. But over time, your home will make you money when you sell in most cases as long as you stay in it for five to seven-plus years.”
Josh Jarboe, principal broker/owner of RE/MAX Empire in Mount Washington, Kentucky, has never believed real estate should be viewed as a guaranteed investment. But he firmly believes it remains one of the strongest, proven paths for long-term wealth creation.
“Unlike the stock market, homeownership offers something beyond financial returns: stability, utility, leverage and the opportunity to build equity while enjoying the asset itself. Higher home prices and mortgage rates have undoubtedly changed the equation, especially for first-time buyers. However, I remind clients that real estate and stocks aren’t necessarily competing investments. They serve different purposes, and a well-diversified financial strategy can include both.”
Leslie Hirsch, a broker at Christie’s International Real Estate New York, admits that many of her clients have been questioning whether to keep their money invested in the stock market, which has been performing so well, or purchase real estate.
“In New York City, this is driving a very strong rental market, with record prices being paid, as would-be buyers opt to rent instead of tying up cash in real estate,” she says. “Financial advisors/portfolio managers are encouraging clients to stay in the market and not buy real estate. On the flip side, there is chatter about the stock market being too good to last. People need housing, and they also want to diversify investments, maximize returns and mitigate risk.”
Hirsch tailors her advice depending on a client’s personal situation, but admits that generally speaking, the anticipated timeline to hold onto property and see appreciation has shifted.
“I cannot tell someone that we would expect to see ‘x’ amount of appreciation per year, as we have not seen predictable appreciation in Manhattan for 10-plus years,” she says. “Instead of a five-year property value growth cycle, we are now seeing 10-year-plus cycles, and the key is to buy property during the down cycle and sell when it’s up.
“For clients that I know plan to move cities, expand their family or upgrade in three to five years, I try to manage expectations and sometimes suggest they look at renting instead of buying while saving up for the bigger purchase down the road. Some people who would only ever consider being homeowners (never renters) will now consider it.”
Hirsch knows that housing is a fundamental need, and thus is not worried about mortgage rates and the market because the market will ultimately adjust to meet the climate of the day.
“If housing prices become unaffordable, then prices will come down,” she explains. “If the rents go too high, then purchasing becomes the better option again. What I do worry about is the affordability of housing for first-time homebuyers and people starting out in their careers.
“The second home market is where I see even more dramatic fluctuation happening because that is a ‘want’ and not a ‘need.’ When we see home values decrease enough, we eventually see investor buyers swoop in to purchase them. Then, when the stock market stops performing as well, we will see people pivoting back to real estate again, and the prices will stabilize.”
Jarrod Duncan, also with Christie’s International Real Estate New York, has a take as a real estate investor, feeling that while stocks may be booming, real estate is still a strong long-term investment.
“I own many properties in the Southeast that have increased in value exponentially since purchasing them,” he says. “I am also invested in the stock market, as I feel like it’s important to have multiple vehicles for wealth building. I do agree that the stock market has been a good place to be the last few years. So has real estate in certain places, especially in the Southeast, where people are moving for tax advantages, etc.
“I also think that investing in real estate can be even better in an elevated rate environment. Higher rates keep prices down, and you can always refinance, but an attractive deal may not come around again for years. There are some potential tax advantages to investing in real estate, such as the ability to take advantage of accelerated depreciation and ongoing costs to offset other sources of income. I remain committed to investing in real estate and recommend it to others if the fit is right for their long-term goals.”
Jarboe echoes the sentiment that the concern isn’t people choosing stocks over real estate, but the growing number of Americans being priced out of homeownership altogether.
“The longer affordability remains a challenge, the greater the potential wealth gap between those who own real estate and those who don’t,” he says. “Ultimately, I encourage clients to focus less on timing the market and more on whether purchasing a home aligns with their financial position, lifestyle and long-term goals. Real estate isn’t a guaranteed investment, especially in ‘boom-towns/cities’, but historically, patience and responsible ownership have rewarded those who take the long view.”
