The U.S. housing market has broken record after record in recent years.
One recent example: The total value of America’s homes reached $55.1 trillion in September, according to Zillow. That’s $862 billion more than they were worth just one year prior — and a whopping $20 trillion more than they were worth in 2020.
Yet this growth still wasn’t enough for real estate to offer the best return on investment in recent years. Another investment has real estate beat by a long shot.
Stock market investors have significantly outperformed their real estate counterparts over the past three years, with equity returns dwarfing housing market gains by a substantial margin, according to data from the New York University (NYU) Leonard N. Stern School of Business.
From 2023 through 2025, stocks — as measured by the performance of the S&P 500 index, including dividends — delivered annual returns of:
- 2023: 26.06%
- 2024: 24.88%
- 2025: 17.78%
In contrast, housing market appreciation slowed considerably during the same period. The NYU data does not disclose the source of the housing numbers. Nevertheless, NYU says housing gains were:
- 2023: 5.68%
- 2024: 3.96%
- 2025: 1.58%
Even during the housing market’s best recent years, stocks still trounced the return of real estate. In 2020, real estate surged a healthy 10.43%. But stocks did better, recording a gain of 18.02% that year.
In 2021, real estate jumped a phenomenal 18.86% — the largest single-year gain in housing values since 1947. Still, it wasn’t enough to top stocks, which rose 28.4% that year.
The disparity highlights a fundamental difference between the two asset classes. Stocks represent ownership stakes in operating businesses that generate profits, innovate and expand into new markets. These companies actively work to increase shareholder value through product development, market expansion and operational improvements.
Housing, by contrast, appreciates primarily through supply constraints and inflation. Real estate doesn’t produce goods or services — it simply exists as a physical asset whose value grows modestly as population increases and construction costs rise.
The stock market’s liquidity advantage also played a role. Investors can buy and sell shares within minutes, while real estate transactions typically take weeks or months to complete and involve significant transaction costs.
Financial advisors note that while housing has historically served as a stable long-term investment, the recent three-year performance gap underscores why stocks have traditionally delivered superior returns over extended periods.
These realities don’t make housing a bad investment. We all need somewhere to live, and the right home can provide a sense of joy that cannot be measured in dollars and cents.
But if you want to get rich, history’s verdict is clear: The stock market historically has been the place to be.
Add a Comment