What is the best investment, owning a house or owning stocks? If you ask most Americans, they probably prefer the former. A new study from the Federal Reserve Bank of New York examined consumer preferences for home ownership and how their attitudes have changed during the course of the COVID-19 pandemic. Survey participants were asked to rate which was the best investment (a home or financial assets such as stocks) and what factors contributed to their choice.
Research has shown that residential real estate has acted as a strong hedge in most bear markets, with the notable exception of the Great Recession. The early days of the pandemic are a good example: the S&P 500 SPX index, + 1.48% lost more than 20% in the first quarter, while the national Case-Shiller home price index increased 1.4% . That stock market, of course, has since recovered. That said, Americans were more likely to cite higher home performance in 2021 than the year before, likely a reflection of the incredibly rapid pace of home price appreciation across the country. But people’s attitudes toward the housing market have changed during the course of the pandemic, the researchers found. “Preference for housing declined in October 2020 and returned to the pre-COVID level in February 2021,” the study authors noted. That shift in housing preferences was not driven by concerns about home prices. Some Americans expressed more concern about the risk of vacant rental units, while concern about being able to make mortgage payments may have had an effect on people’s predilection for home ownership. People’s inclination towards home ownership can also be a reflection of their gender or education. Women were more likely to prefer housing than men, and non-college graduates opted for home ownership more often than those with college degrees.