44% of Buyers Think a Home Is a Better Investment Than Stocks. Are They Right?

I just bought a house, and I'm thrilled at the prospect of turning it into a beautiful and stable home for myself. But according to findings from the National Association of Realtors, an awful lot of Americans take a different view of owning a home. In fact, 44% of respondents to the 2024 NAR Home Buyers and Sellers Generational Trends survey believe that a house is a better financial investment than stocks.

While buying a house certainly has value, it's not quite an investment in the way these people assume. Here's why.

A primary residence isn't an investment

With stocks, you purchase shares and (ideally) hold them for a period of at least several years, during which time they (ideally) grow in value. But owning a home is a bit different.

A house costs you time and money

Unlike stock investments, owning a home comes with a lot of legwork. You're responsible for maintenance and repairs, which will cost you money and time, especially if you do some of the work yourself. You'll also need to pay property taxes (which tend to rise over time), homeowners insurance, and possibly homeowners association fees.

When you sell a house, you will have put a ton of money into it over the years. When you own stocks, you can monitor their performance and sell if you need to, but otherwise, they're pretty low maintenance.

Appreciation isn't guaranteed

It's true that homes often grow in value over time -- but it's not guaranteed. It's also impossible to predict the timeline for such an occurrence. If you need to sell a home just a year or two after moving in, you're unlikely to get enough money for it to make up for what you paid for closing costs and all the other amounts you spent while buying it -- let alone make a profit.

Of course, stocks aren't guaranteed to rise in value, either. But over the last 50 years, the average annual stock market return has been 10%.

You have to sell a house to realize gains

Finally, when it's time to use the money you've earned from your stock investments, you can sell them and pocket the money. But selling stocks is a lot different from selling a house -- you'll likely pay capital gains taxes on your earnings, of course. But you won't pay closing costs or property taxes. And you won't need to hire a real estate professional and pay them a commission.

True, you could sell your home yourself. But real estate law is complicated, and you may not have the time and skill to market your home the way an experienced real estate agent would.

Want to invest in real estate?

None of this is to say that you can't buy houses as an investment, even if your own home isn't one. You can certainly buy a home to rent out to tenants. But this is definitely not the easiest way to make money from real estate.

Based on my many (many) experiences as a renter in different places over the years, many otherwise sensible people don't quite realize how difficult it is to be a successful landlord and maintain a property while earning money from it. You don't want your tenants to encounter issues with major home systems that should've been addressed before they moved in (and preferably, before they became a hazard to both your tenants' health and safety, and the value of the property).

If you want to make money from real estate investments, rather than buying rental properties or believing that your own home is an "investment," you may want to consider REITs instead. "REIT" stands for "real estate investment trust," and it's an entity that holds a collection of commercial real estate or real estate loans. You can invest in them via your brokerage account in some cases, and they are often less volatile than stocks.

Home sweet home

Despite the opinions of nearly half of home buyers, a primary residence isn't really an investment -- it's a place to live. It's your beloved home. And unlike a rental, if you have a fixed-rate mortgage, your monthly housing payment will remain the same for the duration of the loan (or can even go down, if you refinance to a lower rate).

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Buying a home has definite benefits -- even if making you financially richer in a direct way like stock investing isn't really one of them.