S&P 500 Beat Housing Nearly 3-to-1 Over the Past Decade

The S&P 500 has returned 235% from December 2015 through December 2025, while the Case-Shiller Index of U.S. home prices rose 87% over the same decade — and the stock figure excludes dividends, which push total returns even higher.

That gap is widening. The average 30-year fixed mortgage rate is back above 7% as the Federal Reserve tightens policy again. The housing market has been largely frozen since the COVID-era boom ended in 2022, when the Fed launched its aggressive rate-hiking campaign against inflation. Meanwhile, the AI boom has driven the S&P 500 to a streak of double-digit annual gains unseen since the late 1990s.

The divergence is reshaping how younger Americans build wealth. Shut out of the housing market, many are choosing to rent and invest in stocks rather than save for a down payment on a home they may never afford. Over the past decade, that trade has worked.

Economists Challenge the Homeownership Consensus

For Ray Fisman, an economist at Boston University, and Michael Luca, an economist at Carnegie Mellon University, the split between housing and equities should force Americans to rethink long-held assumptions about owning a home.

"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. "Buying a home also bundles two very important, but very different, decisions: where to live, and how to invest a large chunk of your life savings."

The economists acknowledged the comparison is not entirely apples to apples. A home provides a place to live as well as an investment return, and the U.S. tax code offers benefits for homeownership. But even when home prices post robust gains, "the returns to buying can be, well, meh," they added.

The 2026 numbers back that up. The latest Case-Shiller data shows home prices up 1.5% nationwide this year, while the S&P 500 is up 13% — despite the Iran war and fears of an AI bust sending stocks on a wild ride.

The Leverage Illusion

Borrowing may distort how homeowners perceive their gains, according to Fisman and Luca. Buyers finance the vast majority of a purchase price while putting down only a small slice of equity, so any appreciation gets magnified. A 20% down payment on a house that rises 10% in value produces a 50% return on the owner's initial equity, they noted.

The same leverage cuts the other way. A price decline has outsized effects on equity, especially because a home is a "single, illiquid, undiversified asset." That is precisely why financial advisers do not recommend borrowing hundreds of thousands of dollars to buy a single stock, the economists wrote.

They are not arguing that no one should buy. Ownership carries real upside, such as remodeling without a landlord's permission. Renting carries real downside, including limited supply and the risk of being forced to move.

"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."

A Buyer's Market With Strings Attached

For Americans focused on where to live rather than how to invest, the current market favors buyers. Sellers offered concessions in 44.7% of home sales last month, up 2.1 percentage points from a year ago and the highest share for August since at least 2020, Redfin reported.

Those concessions typically include mortgage rate buy-downs or sellers covering repair costs. To win over increasingly selective buyers, sellers are also throwing in household appliances or offering $10,000 to $20,000 in concessions.

Some have grown desperate. One Atlanta real estate agent offered a client a free week-long vacation in an Airbnb owned by the home's seller. Another in Charlotte offered an all-expenses-paid cruise. Others are simply cutting asking prices.

"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's Sasha Rogelberg.

For households weighing a purchase now, the calculus runs through both channels at once: leverage remains expensive with mortgage rates above 7%, but seller generosity is quietly discounting asking prices in ways the headline indices have yet to fully capture.