Economists say homeownership bundles two decisions as stocks outpace housing
The S&P 500 has soared 235% in the past decade while home prices rose 87%, a gap economists say should challenge views of housing as the best investment.
Economists say the widening gap between stock market and housing returns should challenge Americans' long-held views of homeownership as the best investment.
From December 2015 through December 2025, the Case-Shiller Index of home prices increased 87 percent, while the S&P 500 soared 235 percent, according to an analysis by economists Ray Fisman of Boston University and Michael Luca of Carnegie Mellon University.
"The rent-versus-buy decision involves real trade-offs that too often go unrecognized, especially by those who can comfortably afford to buy," they wrote in a Wall Street Journal op-ed this past week.
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They argue that buying a home bundles two distinct decisions: where to live and how to invest a large portion of savings.
The housing market has been largely frozen since the COVID-era boom ended in 2022, when the Federal Reserve began raising rates to fight inflation.
The average 30-year fixed mortgage rate is back above 7 percent, while the AI boom has supercharged stocks with double-digit annual gains.
Younger Americans, shut out of the housing market, are increasingly choosing to rent and invest in stocks rather than save for a downpayment, the economists noted.
So far in 2026, the latest Case Shiller data shows home prices up 1.5 percent nationwide, while the S&P 500 is up 13 percent.
Fisman and Luca acknowledged a home provides a place to live as well as an investment, and the U.S. tax code has benefits for homeownership.
But even when home prices see robust gains, "the returns to buying can be, well, meh," the economists added.
They said the ability to borrow with a mortgage distorts how homeowners perceive gains, as a small downpayment can magnify returns on equity.
For example, a 20 percent downpayment on a house that appreciates 10 percent in value translates to a 50 percent return on the initial equity.
However, a price decline has similarly outsized impacts, and a home is a "single, illiquid, undiversified asset," they wrote.
"The mistake we see all too often is the tendency to bundle two very different decisions," Fisman and Luca said. "Where you want to live need not be where you want to invest."
For those focused on where to live, prospective buyers currently enjoy a buyer's market with rising seller concessions.
Sellers gave concessions in 44.7 percent of home sales last month, up 2.1 percentage points from a year ago and the highest share for August since at least 2020, according to a recent Redfin report.
Incentives include mortgage rate buy-downs, payments for repairs, household appliances, or cash concessions totaling $10,000 to $20,000.
Some sellers are also dropping asking prices, with one Atlanta agent offering a client a free week-long vacation in an Airbnb owned by the seller, and another in Charlotte offering an all-expenses-paid cruise.
"If we were to quantify all these concessions… we would see that home prices are down, and people are getting better deals," Redfin Chief Economist Daryl Fairweather told Fortune.
The economists said they are not arguing no one should buy a home, noting ownership allows remodelling without permission, while renting carries risks like limited supply.
With files from Yahoo News and Fortune