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Stocks Outshine Homes: Young Investors Choose AI Over Mortgages
28 Sep
Summary
- The S&P 500 has surged 235% over the last decade, far outpacing home price increases.
- Higher mortgage rates are pushing younger Americans towards renting and stock investing.
- Economists challenge traditional views on homeownership as a guaranteed wealth builder.
The U.S. housing market has experienced a significant slowdown since the COVID-era boom concluded in 2022, exacerbated by rising mortgage rates now exceeding 7%. This contrasts sharply with the stock market, which has been buoyed by the AI boom, with the S&P 500 achieving substantial annual gains not seen since the late 1990s.
Consequently, younger Americans, finding homeownership increasingly out of reach, are opting to rent and invest in stocks to build wealth. Data from December 2015 to December 2025 reveals the S&P 500's 235% growth far surpassed the Case-Shiller Index's 87% rise in home prices.
Economists Ray Fisman and Michael Luca argue this divergence challenges the conventional wisdom surrounding homeownership, highlighting that buying a home conflates decisions about where to live and how to invest. While acknowledging homeownership's utility and tax benefits, they note that even robust home price gains offer "meh" returns compared to equities.
As of 2026, home prices have seen modest 1.5% nationwide growth, while the S&P 500 has climbed 13%, despite market volatility. Fisman and Luca suggest that the magnified gains from leveraged home purchases can distort homeowners' perception of their actual investment returns.
