• According to Redfin's latest study of 24 metro areas between Jan. 2010 and May 2016, stocks have a greater return on investment than homes.
  • The only four metros where housing showed a higher ROI were Miami and California's San Jose, San Francisco and Oakland.

Although real estate is considered a strong investment, is it smarter to place your funds in stocks than in houses? According to a new study by real estate brokerage Redfin, stocks showed a higher rate of return than housing investments between January 2010 and May 2016.

The Redfin analysis was completed with investment advisory firm FutureAdvisor and compared gains in home prices with returns on a median stock portfolio in 24 major metro areas. Because the analysis only included certain metro areas, the results can’t be extrapolated to every market.

“A median financial portfolio earned between 63 and 70 percent since 2010 in each of the 24 metros studied” — this was a higher rate of return than housing in every metro studied except four.
future-advisor-redfin-results
The four metros where housing showed a higher rate of return than stocks were:

  • Miami (where home prices increased 73.3 percent)
  • San Jose, California (where home prices increased 74.7 percent)
  • San Francisco (where home prices increased 72.7 percent)
  • Oakland, California (where home prices increased 67.6 percent)

“These were all housing markets where prices skyrocketed and crashed the most during the bubble years,” said Redfin.

“There are pros and cons to any investment, but real estate is unique in that it offers the advantage of forced savings through the monthly mortgage payment,” said Redfin chief economist Nela Richardson in a press release.

“The fact that homeowners build an increasing share of equity just by paying their mortgages every month enforces a savings discipline on consumers that is absent in stocks. For this reason, real estate historically has served as the primary engine of wealth creation, particularly for the middle class.”

In most cities, multi-family buildings, condos and co-ops had higher appreciation than single-family homes.

The best time to buy in 2010 was December, with home prices appreciating 46 percent since then, compared to just 36.8 percent for homes purchased in June of that year.

Redfin used MLS data on more than 730,000 property sales during 2010 across 24 metro areas. The company measured price appreciation by using the 2010 purchase price from county records and the June 2016 Redfin Estimate for all home sales, then took the median for each metro.

Redfin required a minimum sample size of 20 listings for measuring appreciation by property type. FutureAdvisor conducted backtesting of user portfolios as of May 18, 2016, by using asset class-based returns from January 2010 to May 2016 to simulate a percentage return. The company then took a median percent return of the financial portfolios for each metro area.

Email Marian McPherson

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Only 3 days left to register for Inman Connect Las Vegas before prices go up! Don't miss the premier event for real estate pros.Register Now ×
Limited Time Offer: Get 1 year of Inman Select for $199SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×