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Housing or Equities? The better long-term investment is…

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Guest | 07 May 2013, 11:53 PM Agree 0
From the perspective of Canadian investors it also depends on how closely recent U.S. market trends reflect this country's future performance.
That said, since the formal end of the recession, in early-2009, the U.S. stock market has recovered much more strongly than housing. As of Tuesday’s close, the S&P 500 was up more than 74% since the beginning of 2009. Home values, as measured by the S&P/Case-Shiller index, were up 9.3% between February 2012 and 2013, while the S&P index stands almost exactly where it did four years ago.
Go back to the beginning of 2000, when stocks were riding the crest of the dot-com wave, share prices crashed sharply and took years to recover. Housing, though, barely paused in its long upward march, peaking in 2006-07  before plunging. Over the 13-year stretch, the Case-Shiller index stood 46.6% higher in February than it did in January 2000, while the S&P 500 was up just 4% over the period.
However, using a “total return” variant of the S&P 500 that takes dividends into account, the research center notes that the S&P index is up nearly 43% since January 2000, matching the gain in the Case-Shiller.
The research does little to settle the argument over which asset class is better, but Pew notes that performance in either depends not just on which asset you buy but when you buy it.
  • Joe White | 09 May 2013, 07:08 PM Agree 0
    Carrying costs are also not factored into owning real estate in the S&P/Case-Shiller Home Price Indices. Even though these costs may reduce the overall rate of return, I think real estate is a much safer investment over that "long run."
  • SJP | 09 May 2013, 07:56 PM Agree 0
    This doesn't seem to take leverage into account either, which is why real estate turns out double-digit returns even when the market shows single-digit return.

    I suppose you could purchase equities on margin as well, but not at the same leverage.
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