A while back, I wrote that while owning a home has traditionally been viewed as the cornerstone of Americans’ ability to build wealth, you don’t necessarily need to buy a house to reach your financial goals. And that an updated version of the American dream could mean spending less of your hard-earned money on housing, and spending more money on travel, experiences, entertainment, or a host of other things that make life enjoyable.
Well, it seems like some people are taking this message to heart.
For the first time in a long time, more household wealth is concentrated in stocks than in real estate:
Not only are U.S. households buying more stocks, but stocks now make up a bigger percentage of household net worth than real estate for really the first time since the 70s:
I don’t think it’s hard to uncover why this is happening.
The U.S stock market is up nearly 97% over the past three and a half years alone. It grew 153% from 2019 to 2024.
Meanwhile, from 2019 to 2024, the median home value in America went from $269,600 to $350,000. That’s a 30% increase compared to just a 9% increase in median household income over that time.
The stock market has been on a tear while housing has become more and more unaffordable—particularly for younger people.
A recent Bloomberg article revealed that Nantucket, Massachusetts has been one of the hottest and least accessible real estate markets in the country. You’d be hard-pressed to find a location anywhere in the country where real estate has appreciated more. The median home price in Nantucket was $500,000 in 1995 and has risen to a startling $4 million today.
But what is perhaps even more startling is that if you had invested $500,000 in the S&P 500 in 1995, you’d have over $14 million today.
All of this has led to only a quarter of people under 40 who think that housing is a very good investment. And nearly 40% of adults aged 18-39 who feel “meh” or worse about housing as an investment:
That’s quite a change from previous generations’ feelings about real estate.
I was reading an article the other day from a Gen X woman describing her journey to reaching a million-dollar net worth and why she felt so underwhelmed by the milestone:
“Sometime around 2019, my husband and I became millionaires in terms of net worth—mostly based on the appreciation of our house.
We barely noticed the milestone, and it hasn’t made much difference in our ability to retire. The cost of everything has inflated, and so much of our net worth is wrapped up in real estate. Smaller nice houses in our community are only marginally less expensive than our current house. My savings under a metaphorical mattress haven’t even kept pace with inflation.
Our million dollars did not transform our lives. It is wrapped up in the house we live in.”
Yes, a house is definitely an asset and one that can be passed on to your family when you die, but rarely do people use the equity in their home to fund their retirement or other financial goals.
We’ll have to see how this plays out in the future. But maybe people’s views on owning a home and the traditional American dream really are changing.
Thanks for reading!
Jake Elm, CFP® is a financial advisor at Dentist Advisors. Jake a graduate of Utah Valley University’s nationally ranked Personal Financial Planning program. As a financial advisor at Dentist Advisors, he provides dentists with fiduciary guidance related to investments, debt, savings, taxes, and insurance. Learn more about Jake.