U.S. House Prices vs. the S&P 500

Is investing in real estate more profitable than investing in the S&P 500 over a long period? This long term chart shows that for much of the last century investing in the S&P 500 returned much greater returns than investing in real estate did. This chart only misses one thing in my opinion. This chart does not show possible rental income and the re-investment of this rental income in other houses. At the same time it also doesn’t show possible costs and taxes associated with homeownership and thus with investing in real estate. Nonetheless it is a nice chart to view.

US House prices vs. S&P 500 long term
Long term US House Prices vs. S&P 500

Here is another chart showing US house prices from 1987 till April, 2019. This is the Case Shiller Index.

Case Shiller National and Composite Indices Nominal
Case Shiller National and Composite Indices

Here is the same Case Shiller index with year-over-year percentage change until April 2019. This chart is showing that the rise of house prices has declined the last few years. A cause for this has been the Federal Reserve which has raised rates from 2016 till 2019. This has caused mortgage rates to rise over that same period.

Case Shiller National and Composite Index year-over-year percentage change
Case Shiller National and Composite Index year-over-year percentage change

Here’s a chart of the average fixed rate on 15 year and 30 year US mortgages. It will be interesting to see whether the drop in rates will lead a pick up in house prices later this year. From the end of 2018 mortgage rates have been dropping lower as it has been anticipated that the Federal Reserve will lower rates (which they have done with 0.25% in July, 2019.

15 Year and 30 Year Fixed Rate Mortgage Average in the United States
15 Year and 30 Year Fixed Rate Mortgage Average in the United States

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