+34
With mortgage rates above 7%, the S&P 500 has far outpaced home price gains over the past decade, prompting economists to question traditional homeownership views.
As mortgage rates climb back above 7%, a growing number of Americans are weighing whether to invest in stocks instead of buying a home. Over the past decade, the S&P 500 has dramatically outperformed the U.S. housing market, and economists say the gap could widen further as the Federal Reserve tightens policy again. From December 2015 through December 2025, the Case-Shiller Index of home prices rose 87%, while the S&P 500 soared 235%, excluding dividends.
Housing Market Frozen Since 2022
The housing market has been largely frozen since the COVID-era boom ended in 2022, when the Federal Reserve launched an aggressive rate-hiking campaign to curb inflation. The average 30-year fixed mortgage rate is now back above 7%, making home purchases less affordable for many buyers. At the same time, the AI boom has supercharged stocks, pushing the S&P 500 to a streak of double-digit annual gains not seen since the late 1990s.
Younger Americans, many of whom have been shut out of the housing market, are increasingly choosing to rent and build wealth through investments rather than save for a down payment on a home they may never afford. That strategy has paid off over the past decade.
Economists Challenge Homeownership Assumptions
Ray Fisman, an economist at Boston University, and Michael Luca, an economist at Carnegie Mellon University, argue that the stark split between housing and stock market returns should challenge long-held views on homeownership. They noted that the rent-versus-buy decision involves real trade-offs that are often unrecognized, especially by those who can comfortably afford to buy.
Buying a home bundles two very different decisions: where to live and how to invest a large chunk of life savings, the economists wrote. While a home provides shelter and tax benefits, the investment returns can be lackluster even when prices rise robustly.
The comparison is not entirely apples to apples, they acknowledged, because a home offers a place to live as well as potential appreciation. But the ability to borrow heavily may distort how homeowners perceive their gains. For example, a 20% down payment on a house that appreciates 10% translates to a 50% return on initial equity. However, a decline in prices has similarly outsized negative effects, especially since a home is a single, illiquid, undiversified asset.
Financial advisers generally do not recommend borrowing hundreds of thousands of dollars to buy a single stock, Fisman and Luca pointed out. They added that they are not saying no one should ever buy a home. Ownership has upside, such as remodeling without a landlord's permission, while renting has downsides, like limited supply and the risk of being forced to move. The mistake, they said, is bundling two very different decisions: where you want to live need not be where you want to invest.
2026 Returns and Seller Concessions
So far in 2026, the trend continues. The latest Case-Shiller data shows home prices are up 1.5% nationwide, while the S&P 500 is up 13%, despite the Iran war and fears of an AI bust sending stocks on a wild ride this year.
In another sign of a cooling housing market, sellers are increasingly offering incentives to attract buyers. In August, 2.1 percentage points more sellers offered concessions compared to a year ago, the highest share for that month since at least 2020, according to Redfin. Incentives typically include mortgage rate buy-downs or sellers agreeing to pay for repairs. Sellers are also offering household appliances or concessions totaling $10,000 to $20,000.
Some sellers have become so desperate they are dropping asking prices. One real estate agent in Atlanta offered their client a free week-long vacation in an Airbnb owned by the home's seller. Another in Charlotte offered an all-expenses-paid cruise. Redfin Chief Economist Daryl Fairweather said that if all these concessions were quantified, it would show that home prices are down and people are getting better deals.
S&P 500 Mortgage Rates Housing Market Case-Shiller Index Federal Reserve Homeownership Redfin
Canada Latest News, Canada Headlines
Similar News: You can also read news stories similar to this one that we have collected from other news sources.
Senior Poverty Rates Surge to Record Highs, Disproportionately Affecting WomenPoverty among Americans aged 65 and older has risen for the fifth consecutive year, jumping 45% since 2019 to the highest rate of any age group. Women over 50 are particularly impacted due to lifetime earnings gaps, with nearly 17% of women over 65 living in poverty. Experts warn that health crises, market downturns, and lack of retirement savings are compounding these risks.
Read more »
Top Social Media Platforms Are Refusing To Run Ads For Documentary About Elon MuskThe MAGA friendly tech mogul predicted the film will be the “most convincingly terrible hit piece” on him.
Read more »
U.S. Debt Outlook Darkens as Treasury Yields Reach Two-Decade HighsTreasury yields surged to levels not seen in two decades, increasing concern about the growing burden of U.S. debt. With annual interest costs near $1 trillion, debt at $40 trillion and the deficit approaching $2 trillion, higher rates could sharply widen future budget deficits. The Congressional Budget Office estimates that rates remaining one percentage point above baseline could increase the total deficit to 14% of GDP by 2056.
Read more »
Fannie Mae and Freddie Mac Tighten Standards for Condo Mortgage FinancingFannie Mae and Freddie Mac are imposing stricter financial and structural reviews on condominium buildings and requiring condo associations to reserve at least 15% of assessment income, aiming to reduce risk after the Surfside building collapse. The changes may further weaken an already struggling condo market by adding financing obstacles for buyers and raising maintenance costs.
Read more »